Cannabis Industry Leaders Call for Immediate Government Intervention to Prevent Systemic Failure of Small Businesses and Craft Farms

StandForCraft.com, Cannabis Council of Canada, and Canadian Chamber of Commerce unite to endorse a short form working paper demonstrating the immediate need for intervention to save failing small businesses in Canadian cannabis.

Vancouver, British Columbia--(Newsfile Corp. - October 28, 2022) - Today StandforCraft.com, in association with the Cannabis Council of Canada and the Canadian Chamber of Commerce, published their latest in a series of working papers demonstrating the need for immediate intervention in excise tax policy for Canadian cannabis.

Even the most commercially successful and efficiently run farms cannot continue to operate in an environment which often federally taxes them in excess of 30% of monthly top line revenues. No other consumer facing industry in Canada is taxed to this extreme. Certainly none with a widespread and low cost illicit competitor that does not bear the burdens of tax nor regulatory compliance.

The paper demonstrates a systemic lack of breakeven income levels for firms large and small across the sector. It articulates a specialized need to preserve small business participation in Canada's nascent cannabis industry with targeted relief combatting the growing balance of ~$100m currently overdue to the Canada Revenue Agency (CRA).

Firms cultivating and processing cannabis in the Canadian industry are likely ~98% absent self sustaining breakeven income. Two thirds of reporting entities owe CRA an exponentially widening outstanding debt. 47% of all CCAA filings in the first six months of 2022 came from the cannabis industry. These financial metrics demonstrate the desperate reality of material overtaxation, with end consumers paying well over half of their retail price to federal excise and provincial markups.

StandforCraft recommends several proven policy strategies, battle tested in other sectors and cannabis jurisdictions. Recommended recalibration includes:

• Moving to a 10% tax rate that adapts to price fluctuation
• Graduating taxation based on production volume, prioritizing small business participation
• Unifying a national excise stamp
• Normalizing payment terms to align provincial payables with excise timelines
• Encouraging provinces to rationalize markups and tariffs
• Eliminating Health Canada's 2.3% regulatory fee

"The Cannabis Council of Canada supports the call for urgent action in response to the unprecedented financial crisis raging in the legal cannabis sector," said George Smitherman, President and CEO of the Cannabis Council of Canada. "The extraordinary increase in cannabis producers who have fallen into default with CRA due to oversized excise tax obligations is an alarm for action."

"Canada's excise tax regime is inefficient and imposes significant administrative and economic burdens on businesses who operate across Canada, particularly small scale cultivators and processors," said Michael Harvey, VP of Policy and International for the Canadian Chamber of Commerce. "The legal sector therefore risks being uncompetitive with the illegal market given that these illicit businesses are not required to pay the cost of compliance. Reform is needed now more than ever to help our legal sector grow and displace the legacy market," he continued.

"Alongside industry leaders like the Cannabis Council of Canada, Deloitte, and Ernst and Young, StandforCraft has been supplying data and analysis on the inherent overtaxation of the Cannabis sector in Canada for over two years," said Dan Sutton, Founder of StandforCraft. "The time for intervention has come and gone, and without immediate action the participation of small businesses in the future of legal Canadian cannabis is materially at risk," Sutton added.

The coalition is recommending short term roundtable emergency intervention planning inclusive of small business, Health Ministry, Finance Ministry, Innovation, Science, and Economic Development (ISED), and the Canada Revenue Agency (CRA).

About StandforCraft.com

StandforCraft is a coalition of 45 cannabis cultivators and processors self identifying as Small to Medium Enterprises. It includes micro cultivators, micro processors, standard licenses, and farms united on the mission to deliver a diverse industry inclusive of small business as promised at the outset of Canadian legalization.

About Cannabis Council of Canada

The Cannabis Council of Canada ('C3') is the national and international representative of Canada's licensed producers and processors of cannabis. C3's mission is to promote industry standards, support the development, growth, and integrity of the regulated cannabis industry, and serve as an important resource on issues related to responsible use of cannabis for medical and non-medical purposes.

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About Canadian Chamber of Commerce

The Canadian Chamber of Commerce is Canada's largest and most activated business network — representing 450 chambers of commerce and boards of trade and more than 200,000 businesses of all sizes, from all sectors of the economy and from every part of the country — to create the conditions for our collective success. The Canadian Chamber of Commerce is the undisputed champion and catalyst for the future of business success. From working with government on economy-friendly policy to providing services that inform commerce and enable trade, we give each of our members more of what they need to succeed: insight into markets, competitors and trends, influence over the decisions and policies that drive business success and impact on business and economic performance.

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For media inquiries

ATTN: Dan Sutton, Founder of StandforCraft.com and Founder and CEO of Tantalus Labs.

media@tantaluslabs.com

@DSutton1986 on Twitter

Jess Moran, Founder, KNOWN 519-494-5379, jess@knowngroup.ca

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/142148