Tax hike upsets pot growers

Tax changes could hurt a thriving industry: canola producers

Slapping higher taxes on the province’s cannabis producers unfairly targets an emerging, fast-growing industry that is creating thousands of jobs, says the Alberta Cannabis Council.

Alberta’s cannabis producers feel blindsided by Municipal Affairs Minister Kaycee Madu’s announcement Wednesday that cannabis growing facilities will now be taxed at higher industry rates and not at lower agriculture operation levels.

“We’re obviously unhappy that cannabis was singled out where other cash crops are not,” said John Carle, executive director of the cannabis council, which represents two dozen producers and related companies.

“We’re the only growing environment in the province where we’re taxed at an industrial level now.

“We’re very disappointed that the province didn’t consult with our industry before making this decision.”

Carle said the cannabis production sector has emerged as a major employer, creating 5,000 jobs in the past 18 months and many more to come.

“We don’t think one year into the development of an entirely new sector is the time to be jacking up taxes on people,” said Carle.

“The challenge that we face is that we are being taxed so heavily already as a sector. We still don’t know what our business models and profit-losses are going to look like.

“And now they’re opening up another taxation level on us. It’s too soon.”

The province’s move is akin to “barbecuing the golden goose before it’s laid any eggs,” he said. “We’ve got a lot of golden eggs to lay here, so why are they barbecuing us already?”

Eighty per cent of cannabis production is still in the hands of illegal growers, who pay no taxes, said Carle. That leaves much room for growth for regulated producers providing a safe product and social and economic benefits.

“From a moral standpoint, making it more difficult for us to sell our product makes it easier for illegals to sell theirs, and that’s just wrong.”

The tax changes, which kick in next year, were announced at the Rural Municipalities of Alberta conference in Edmonton, where the decision was welcomed.

Rural municipalities, where the major cannabis production facilities are setting up, argue commercial-scale cannabis production should not be treated, nor taxed, the same as traditional agriculture businesses.

Madu said that until cannabis was legalized a little over a year ago, commercial cannabis businesses did not exist, and current tax regulations did not cover the “unique nature” of the new industrial operations.

“While cannabis is a burgeoning industry, it is important that cannabis production facilities — which are heavy users of municipal services — pay their share for those services,” said Madu in a statement.

Rural Municipalities of Alberta president Al Kemmere, who is a Mountain View County councillor, said municipalities have been asking for cannabis production facilities to be put on an equal footing with other industries since legalization in October 2018.

“I’m glad the government listened to our concerns and acted swiftly.”

Carle said that cannabis producers have always paid industrial taxes on the industrial portion — administration and processing facilities — of their operations. Only the growing portions of cannabis complexes were taxed as agriculture.

Alberta cannabis producers are also saddled with paying a 24.3 per cent excise tax, far higher than the 11.5 per cent paid by Ontario producers and the 7.5 per cent paid in other provinces.

Carle said cannabis producers believe the current taxation system was fair. But if the province was determined to change it, Alberta’s excise taxes should be reduced, offsetting some of the extra costs about to be levied on producers, he said.

While the council is not happy with the tax change, it is not expected to be financially devastating. And there is hope that municipalities — which set tax rates — will recognize cannabis producers’ concerns, he said.

“The impact of the property taxes themselves, I don’t think, are going to be that astronomical in the grand scheme of things. I think municipalities will recognize the mistakes that have been made, or at least we’re hopeful.”

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