According to George Smitherman, CEO of the Cannabis Council of Canada, “insolvency is the result of a formula where taxes and fees squeeze out a big proportion of the overall price,” leaving cannabis companies with insufficient margins to accommodate excise taxes and regulatory fees.
In this article, we discuss how the Canadian government–alongside a changing industry landscape–have contributed to the troubled state of Canada’s cannabis market.
A recent review by MJBiz Daily revealed that two governmental bodies account for the majority of cannabis producers’ unpaid debts: the Canada Revenue Agency (CRA), which collects sales and excise taxes, and Health Canada, which imposes various regulatory fees.
From 2021 to 2022, the Canadian government collected over CA $1.5 billion from cannabis producers’ profits. And as the market begins to show signs of distress, insolvency rates are skyrocketing. As of March 2023, licensed cannabis producers owed over CA $192 million to the CRA in unpaid excise taxes, and nearly CA $4 million to Health Canada in unpaid regulatory fees.
Take, for example, Tantalus Labs, which recently filed a Notice of Intent for Restructuring, after racking up $8.4 million in debt to 92 creditors–of which $4.5 million was due to…