Medical Marijuana Gets No Tax Breaks Post Legalization

bypeterg5 minutes

The federal government is legalizing adult-use marijuana on Oct. 17. It seems to believe that cannabis is an indulgence more or less along the lines of drinking alcohol, but that cannabis does have health benefits. After all, it legalized medical marijuana back in 2001.

But here’s where it gets tricky. New additional taxes on all cannabis—recreational and medicinal—seem to signal the government is focusing much of its effort on the financial side of what promises to be a multibillion-dollar industry. By taxing medical marijuana just as much as its recreational counterpart, is the government forgetting about medical marijuana patients?

Medical Marijuana Will Be Taxed & Taxed Again After Legalization

The truth is that the taxation of cannabis in Canada began as soon as it was approved for medical purposes. While most prescription drugs in this country aren’t taxed, medical marijuana is charged HST, which can range from 5–15%, depending on the province where you live.

But with legalization approaching, the government is going to also apply a “sin” or excise tax on marijuana, just as it does with tobacco and alcohol. This kind of tax can add 10% or more onto each sale. And medical marijuana consumers must pay both the original HST, plus the new excise tax, adding new weight to their financial burden.

Talking about the government’s rationale for the taxes, Minister of Finance Bill Morneau said in a statement: “Our twin goals are to keep cannabis out of the hands of youth and keep profit out of the hands of criminals. Our approach to taxation needs to support these goals.”


This reasoning doesn’t wash with people such as Jean-François Turcotte, who relies on medical marijuana to relieve the pain of injuries from a car accident.

I don't think it's fair that I have to pay tax on medication to begin with … and now they're adding more taxes to it,” he said in an interview with the CBC.

Before getting medical marijuana, Jean-François had used prescribed opioids to manage pain. They caused him a variety of health issues, including depression, requiring other drugs to counteract these effects.

While his opioids and other medicines were covered under a drug plan for clients of Ontario's social assistance program for people with disabilities, the cost of medical marijuana isn’t. So, Jean-François has to pay as much as $720 a month to cover his two-gram-a-day cannabis prescription. And that’s on top of GST, shipping costs and the soon-to-be added excise tax.

About 60% of [medical marijuana] patients today cannot afford their full dose already, that's even without this tax,” adds James O'Hara, president and CEO of Canadians for Fair Access to Medical Marijuana.

He claims the real “sin” in the tax is adding to the burden of people who are taking cannabis for health purposes. And James sounds the alarm bell, pointing out that people who depend on marijuana for medical purposes are already turning to the black market for cheaper medicine, undermining the government in one of its key legalization objectives.

The Government’s Proposing Even More Cannabis Taxes

And government taxes don’t stop there. This past summer, Health Canada announced a proposed annual regulatory fee of 2.3% on the gross revenues of big cannabis producers. This fee is meant to cover enforcement, inspection and other government costs, raising an estimated $100 million annually.

We don’t believe it’s appropriate at this time to enact this new policy, until we have a few years under our belts, and we have some hard data to be able to track our success in moving toward our goal of suppressing the black market,” says Allan Rewak, executive director of the Cannabis Canada Council, in a Globe and Mail interview.

Allan says that a formal submission will be made in the near future to Health Canada opposing the planned fee structure. At the very least, he hopes to defer its implementation.

Health Canada is also planning to impose smaller fees to screen licence applications (up to $3,300 each) and to conduct security screening of cannabis industry employees ($1,650 per employee).

Additionally, the federal government will start granting a new category of licences covering micro-cultivation and micro-processing. Micro-cultivators and micro-processors with gross revenue under $1 million would pay a fee of 1%.


The Cannabis Industry Hits Back

Not surprisingly, players in the cannabis industry aren’t happy. Some point out this kind of aggressive cost recovery was never part of their plans in setting up in the market. They’ve adopted various measures to keep cannabis consumers on their side.

Some producers will absorb the excise tax in their prices and will have compassionate pricing programs to help medical marijuana patients of limited means. Others are urging consumers to sign protest petitions or are promising to work with the government on making medical cannabis tax exempt.

Another way medical marijuana consumers may start finding relief is if prescription drugs are covered by medical health plans. Already there’s some movement in this direction.

Sun Life is the first Canadian insurance company to cover medical cannabis under an extended health care benefits plan, which came into effect last March. Employers can opt for annual coverage ranging from $1,500 to $6,000.

In the meantime, medical marijuana patients are organizing protests and petitions to attack the government tax policy.

Says Abi Sampson, regional coordinator at NORML Canada, one of the longest-running cannabis advocacy groups: “Putting up a financial barrier to access [marijuana] medication that is improving the lives of so many people is unjust, especially at a time when more and more people are coming out of the green closet, so to speak. It’s not in the spirit of cannabis.”

Photo credit: Wesley Gibbs