Cannabis review calls for several changes as industry struggles

A group convened by the federal government to study the legislation that made cannabis legal is recommending the country review one of the industry’s biggest gripes: excise taxes charged to pot producers.

A report compiling 54 recommendations from the five-person expert panel released Thursday urged Finance Canada to consider a new model that would increase excise taxes on products with high quantities of tetrahydrocannabinol, cannabis’s psychoactive component, and lower fees on those with smaller amounts. It positioned the change as a way to move consumers away from high-THC products.

The tax, which the panel called a “substantial burden” for cannabis producers, amounts to the higher of $1 per gram or a 10 per cent per-gram fee for dried and fresh cannabis, plants and seeds.

It was set in 2018, when Canada legalized cannabis and the government expected a gram of pot to sell for $10, at which price 10 per cent is $1. These days, it is easy to find products priced as low as $3.50 a gram, resulting in higher fees for producers who must still pay $1 per gram.

“We see an opportunity to update tax policy to reflect the current reality,” the report said.

The finding came as the legal cannabis sector has faced the sobering reality that the market isn’t as big — or as easy to navigate — as predicted.

Many of the industry’s biggest players, including Canopy Growth Corp., Aurora Cannabis Inc. and Tilray Brands Inc., have spent the last five years laying off workers, closing facilities and grappling with balance sheets that reflect a challenging market and a slow crawl toward profitability.

Others have already fled the industry, selling their businesses or declaring bankruptcy. To blame, they say, is a combination of overregulation, a