Introduction

This article is a highlight piece on the taxation of Canadian cannabis production and sales, and the oversights investors are making when considering the current and future impacts of the Canadian governments taxation policies. The impact from these taxation policies are not unique to one company but instead will affect all Canadian LPs as they begin to enter the legalized recreational cannabis market if they are not prepared. Companies included are Aphria (OTCQB:APHQF), Tilray (TLRY), Canopy Growth(CGC), Cronos Group (CRON) and Aurora (OTCQX:ACBFF) among many other smaller firms competing in the industry.

Current Canadian Cannabis Taxation

On October 17th, 2018, Canada will fulfill the first federally legal sale of recreational cannabis. This will mark the first time a G7 country has decided to federally legalize cannabis for recreational use. While the Canadian cannabis industry continues to climb to unreasonable valuations, there is very little concern surrounding the taxation and how it could be the downfall of the market for recreational cannabis.

The current plan for taxation of cannabis by the federal government is a tax rate of either C$1 per gram or 10% of the price of a gram, whichever is higher. The cannabis sold legally will also be taxed under the GST/HST/PST (Goods and Services Tax/Harmonized Sales Tax/Provincial Sales Tax) which will paid by the consumer and include the excise tax in its overall subtotal calculation. In Ontario, the price per C$8 gram will become C$10.17 after an excise tax of C$1 and a sales tax of C$1.17 are added to the cost.