Canadian Government Unpaid by Cannabis Businesses
Canadian governments are among the top unpaid creditors of failed cannabis businesses.
The Canadian government is growing a large amount of unpaid debts from creditors in the cannabis industry. A recent review (1) by the Canada Revenue Agency (CRA), the federal tax collection organization, and Health Canada, the national department who is in charge of regulations for cannabis production, are some of the highest unpaid creditors for failed cannabis businesses.
During the 2021-2022, several levels of the government collected more than $1.5 billion in Canadian dollars from the cannabis industry through the excise tax, sales tax, other taxes, the annual regulatory fee, and various other fees (1). The amount in unpaid federal excise tax and fees rose sharply.
“It’s increasingly clear that, for many cannabis companies, insolvency is the result of a formula where taxes and fees squeeze out such a big proportion of the overall price,” George Smitherman, CEO of the industry group Cannabis Council of Canada, told MJBizDaily (1).
The Canada Revenue Agency is owed $192.7 million in Canadian dollars by licensed producers as of March 31, 2023; and unpaid regulatory fees rose to nearly $4 million Canadian dollars (1).
An excess of product and wholesale prices lowering, along with strong competition are affecting the cannabis industry.
One example of unpaid debts comes from Tantalus Labs in Vancouver, British Columbia. In June 2023 (1), Tantalus Labs filed a Notice of Intent for Restructuring in a court in British Columbia. Reviewing Tantalus Labs’ list of creditors, revealed that the Canadian government bears the volume of more than half of the licensed producer’s unsecured debts. Tantalus Labs owed 92 creditors, some of those were the Receiver General for Canada and Health Canada. Both of these federal organizations accounted for 58% of the company’s debt. This showed that taxes and fees were a significant amount to their costs.
However, not everyone believes Canada’s fees and taxes are to blame for cannabis businesses struggles.
“All the fees Health Canada scrapes along the way are where the (potential) savings are for businesses,” Norton Singhavon, CEO of Kelowna, British Columbia-based Avant Brands said in a phone interview with MJBizDaily (1). “It’s still an early stage industry. It’s meant to be challenging,” Singhavon commented and further added, “It’s meant to be hard. It’s not a gimme.”
Reference
- Lamers, M. Canadian Government Among Top Unpaid Creditors of Failed Cannabis Businesses https://mjbizdaily.com/canadian-government-among-top-unpaid-creditors-of-failed-cannabis-businesses/ (accessed Aug 7, 2023).
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