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High taxes threaten cannabis industry, producer says

Excise fees costing Burin grower $300,000 a month

BARB DEAN-SIMMONS SALTWIRE NETWORK barb.dean-simmons@saltwire.com @Barbdeansimmons

Five years after the Canadian government legalized the production and sale of cannabis, the industry is facing so many challenges that some growers will fail.

When Prime Minister Justin Trudeau visited Clarenville on Wednesday, March 15, a cannabis grower from Newfoundland’s Burin Peninsula told him, “The only ones winning are the governments, provincial and federal.”

Federal excise taxes on cannabis crops, lack of government funding opportunities for growers and competition from the black market are among some of the factors hindering profit margins, she said.

Taylor Giovannini converted a vacant fish plant in Burin to grow marijuana and her company — Oceanic Releaf — operates nine retail stores across Newfoundland and Labrador.

She told Saltwire Network that because of those retail operations she’s doing better than most cannabis growers.

Still, she said, the excise taxes are taking a big bite out of their revenue.

“The federal excise tax is way too much,” she said, noting some growers pay about $1 in tax for every gram of cannabis produced.

Oceanic Releaf, she said, pays more than $300,000 a month in taxes — $180,000 to the province and $150,000 to Ottawa.

Then there’s the stigma, said Giovannini.

Most major banks don’t want to handle the accounts of businesses that produce or sell cannabis.

She said the first cannabis retail store she opened “almost collapsed” when the Bank of Montreal cancelled their business account.

That meant Oceanic Releaf couldn’t accept debit or credit cards for purchases.

It was cash-only for weeks, she said, until they eventually found a credit union that was willing to do business with them.

Noting that the Cannabis Act is up for review, she asked the prime minister, “When are we going to see some relief?”

“I’ve watched a lot of the struggles in the cannabis industry across the country,” Trudeau said, adding it was a “big step” to legalize cannabis.

“But when you go from completely illegal to a brand-new industry, you’re going to get a lot of it right, hopefully, and I think we did, but there are also a lot of things we are learning,” he said, noting Canada was one of the first jurisdictions to take this path.

He added safety for consumers and protection of children was the main focus behind the decision to legalize cannabis.

“We didn’t legalize so there would be growth in jobs and opportunity,” he said. “We legalized out of a publichealth concern.”

“If we had gone into this … to design a new industry … we might have made some different choices,” he said.

Trudeau said the task now is to consider the business of cannabis and take steps to make sure it can continue to be a beneficial industry.

“I can understand that people who stepped up to be part of the industry in its infancy are part of the growing pains, and we will try and make sure we are capturing their concerns as we look at renewal of the act.”

If the federal government could do just one thing to help the industry right now, Giovannini said, she and others would ask for reduction of excise taxes.

Across the country, she said, cannabis companies are, on average, working on 20 per cent margins — keeping just 20 cents of every dollar they generate.

A 30 per cent margin, she said, is the standard for most businesses and if the excise tax rates weren’t so high, cannabis companies could achieve that.

Giovannini said her company will “be fine” because it’s got the retail operations as well as the grow-op.

She’s making payroll every week for 80 employees — half of them in retail and the others at the Burin production facility — and paying tax bills as they are due.

It’s not the same story for other cannabis producers across the country, she said.

“Some are choosing to make payroll before paying their taxes,” she told Saltwire, “because they aren’t able to do both.”

The market for cannabis has been challenging, she said, because so many got on the bandwagon after 2018, while the black market is still making it a very competitive business.

“There’s going to be a lot of shakeups in this industry going forward,” she said.

Giovannini is just one voice in the cannabis industry but, she said, she’s part of a larger group across the country who will keep pushing for changes.

While the government may have had public safety in mind when it legalized cannabis, she said, “ultimately these are big companies, paying taxes and creating Canadian jobs.”

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2023-03-21T07:00:00.0000000Z

2023-03-21T07:00:00.0000000Z

https://saltwire.pressreader.com/article/281590949806035

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