The launch of the legal adult use recreational market in Canada has been a mixed bag of success and challenges. As anticipated, we’ve seen both significant customer demand and inventory shortages across the country which have caused some frustration for both retailers and customers. Those hiccups, however, are matters of process and will resolve as the industry settles into a natural rhythm of supply and demand.

There are, however, three cannabis-related policies that need immediate attention: the practice of using physical excise stamps, the taxation of medical cannabis and the taxation of cannabis oil based on the value of input material. All three policies run counter to our own corporate priorities, as well as the good of the industry – and our customers -- as a whole.

Excise Stamp

The federal government currently requires that all cannabis products carry excise stamps (proof that the appropriate taxes have been paid by the licensed producer (LP) like those attached to tobacco packaging. The practice is a continual source of frustration among LPs; it is outdated, costly and overly complex.

The logistics of applying the stamps are cumbersome and have caused unnecessary product delays. The physical real estate required to accommodate the stamp itself is also one of the key drivers of criticism leveled against the industry for excessive packaging.

Canada’s alcohol industry moved away from the practice of physical excise stamps years ago in favour of a far more efficient reporting process, and no U.S. state which has legalized cannabis requires excise stamps.

Especially in such a new industry, where the efficiency of the manufacturing process is paramount and non-stamp tracking solutions are available, it is not only counter-intuitive but also counter-productive to demand the manual, physical application of these stamps.

Canada is the second country in the world, and the first member of the G20, to legalize recreational cannabis. Surely, we can apply that same kind of thought leadership to the issue of excise stamps, reducing the efficiency and environmental impact of our product monitoring and tracking systems.

Excise Tax on Medical Cannabis

At Organigram, we’ve addressed this issue before: In Canada, all prescription products are exempt from tax. And yet, medical cannabis, a product authorized by a medical document that even the Ontario College of Physicians refers to as a “prescription”, is subject to a $1/gram excise tax that, in addition to the applicable sales taxes, can makes access to cannabis as medicine financially impossible for some.

Our friends at CFAMM (Canadians for Fair Access to Medical Marijuana) have done tremendous work to call attention to this issue through their #DontTaxMedicine campaign.

Likewise, Vancouver-Kingsway NDP MP Don Davies has become the parliamentary sponsor for an online petition addressing the fact that the excise tax “will disadvantage Canadians seeking relief from serious medical conditions”.

As a result, at Organigram we have committed to paying the tax levied on medical cannabis products, on behalf of our patients, to help ensure none of them are left behind. But true accessibility to necessary therapeutic options needs to be mandated at the government level; medical cannabis needs to be treated on par with its prescription peers.

Excise Tax on Oil Input Material

Finally, Canada Revenue Agency’s (CRA) formula for taxing cannabis oil products has a fatal flaw. Currently, oil production is taxed based on the volume of input material.

The problem is that this approach does not take in to account differing cannabinoid levels in different parts of the plant and, as a result, penalizes efficient LPs who are able to leverage non-flower parts of the plant in the process of oil production or have a less efficient process for oil extraction.

Taxation should be done on the end product, not the input material. The current approach makes life – and costs – extremely difficult – especially for smaller LPs who are still thinking through their processes. CRA will review this tax in the Spring of 2019 and we would encourage them to address the challenges inherent in this strategy as the current system inherently penalizes companies for using trim by-product for oil production.

Greg Engel, CEO, Organigram