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Cannabis Industry Fees Are Preventing Profits, shows Health Canada Report

A new report from Health Canada has revealed that high fees on cannabis businesses are preventing profits in the industry.

The ‘2021-2022 Review of the cannabis cost recovery framework’ aims to inform progress made towards meeting key policy objectives in order to support ‘a diverse, national cannabis industry’.

Under the Cannabis Fees Order, cannabis businesses are subject to fees, implemented in a bid to help Health Canada recover regulatory costs.

Such fees include application screening, security clearance, and import/export permit fees, and an annual regulatory fee.

The report shows that respondents to the report said that the fees are contributing to “challenges achieving profitability and positive cash flow, which are already under significant pressure.”

In total, 37.5% of micro licence (200 m2 of grow space) holders compared to 20.5% of standard licence holders reported that fees accounted for over 10% of operating costs.

The report states: “Fees collected under the Order can impact smaller operations more than their larger competitors due to economies of scale.

READ MORE: California Cuts Taxes to Support Cannabis Businesses

“It is also important to note that licence holder respondents in both micro and standard licence classes represent licence holders in various stages of development, from start-ups with no revenue to large-scale licence holders that operate across the Canadian marketplace.”

Additionally, the report revealed that the annual regulatory fee accounts for 90.5% of all cannabis fee revenue collected by Health Canada between 2018 to 2019 and 2021 to 2022.

In this regard, 10 micro licence holders and 12 standard licence holders stated that the minimum annual regulatory fee is prohibitive “particularly for licence holders with no sales revenue”.

However, while two licence holders suggested the annual fee should be pro-rated based on the month a licence holder enters or exits the market, in light of the rise in medical licences which are exempt, others suggested that exemption from the fee “would not be sufficient to offset the operating costs of a dedicated licensed site for medical sales.”

To read the full analysis please visit: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/industry-licensees-applicants/cost-recovery/2021-2022-summary-report.html

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