Canadian cannabis businesses are calling on the government to change regulations on the industry while wholesalers appeared at parliamentary hearings Monday to testify..Industry owners say the burden of high taxation is making it increasingly difficult to compete against a prominent black market..According to Blacklock's Reporter, CEO of the Cannabis Council of Canada George Smitherman counted 3,000 retail stores, but only 800 licensed wholesalers. .Parliament’s 2018 legalization has not succeeded in “eliminating the illicit market,” said Smitherman..“We need to see change if the fuller potential of the goals of legalization are going to be achieved,” said Smitherman..“I want to draw your attention to the threat of the very sustainability of many license holders of all sizes posed by unsustainably high taxes, fees and markups that leaves almost nobody cash flow positive.”.The testimony comes after a late-May Department of Public Safety report revealed how legalization was followed by black market drug dealers moving online in direct competition with licensees..“The appearance of legitimacy and ease of payment are two key factors that favour the online illicit market over the street-level illicit market,” said the report Public Safety And Cannabis: Taking Stock Of Knowledge Since Legalization..“These factors put the online illicit market on par with the online legal market.”.A British Columbia cannabis producer said “there is more money in a winery,” when testifying at the Commons agriculture committee Monday..Jeff Callaway, CEO of High Ground Medica Inc., told the Western Standard about some regulations contributing to the uphill battle for Canadian companies..“Taxes on cannabis are higher than alcohol or tobacco. For example, an efficient operator can cultivate cannabis as low as 50 cents a gram, but government taxes are approximately $2 per gram,” said Callaway..“Oddly, the largest tax, — and there are several in different names on cannabis: taxes, levies, fees, etc. — are set on a per gram basis and don’t adjust for the sale price.”.“It’s like always being subject to $1,000 in tax because you worked 40 hours no matter if you earn minimum wage or not, so it’s a regressive tax. Not a progressive one. It’s not small either.”.In 2021, Alberta generated $145 million in taxation revenue from the cannabis industry..“Taxes in Canada from cannabis exceed that from wine and are on the path to exceeding beer,” said Callaway..According to accounting firm Deloitte, there has been $15 billion of direct and indirect tax revenue generated while creating 151,000 jobs since legalization..Callaway brought up regulations in Long Beach California, where the government decreased the tax burden on cannabis companies and found tax revenue more than doubled in the following two years..“Further, because there isn’t differentiation between THC content for dry flower it means taxes are the same on, analogously, a bottle of beer or a bottle of vodka.”.“The competition of course is the black market which pays no taxes, has no regulation or costs associated with regulation, and still commands at least 40% market share," said Callaway.."The government has to decide whether they actually want to eliminate illegal cannabis as was one of their stated priorities, support job creation, and be a leader to other countries like Germany which are embarking on legalizing cannabis or cash a short-term tax cheque and let the black market flourish.”.Conservative MP Dave Epp told the agriculture committee it was evident the experiment with legalization had failed..“Neither of the two stated objectives — basically the reduction of organized crime and the reduction of the black market — have occurred,” said Epp..Timothy Deighton, owner of Sweetgrass Cannabis Ltd. of Ymir, B.C., testified and said the Department of Health was a poor regulator..“The huge cost of actually becoming a micro cultivator, it has almost made it impossible. This process took eleven months for us,” said Deighton..“In that process, the 11 months, we were losing up to $50,000 to $75,000 a month waiting for Health Canada to be going through our application.”.Deighton said security requirements alone cost $100,000..“They just do not have the experience or the knowledge in working with plants,” said Deighton..“That has become an issue as far as moving forward in an agricultural sector.”.Federal court records show 13 cannabis wholesalers, including publicly traded companies, filed for bankruptcy protection in the past year, with liabilities totaling more than $200 million.
