Health Canada’s $100 Million Regulatory Fee Could Help Bolster The Black Market Says Industry Insiders

Health Canada's plan to recoup the cost of regulating the legal cannabis industry could be a huge win for the black market.

The new fee comes in the form of a 2.3 percent annual tax on every licensed producer's gross income, which could total $100 million CAD. While Health Canada says the fee is necessary to offset expenses involved in regulating the marijuana market, industry insiders the additional expense will leave them unable to compete with the black market for cannabis - especially since the LP's already have to pay an excise tax of $1 per gram of marijuana

"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," Allan Rewak - Executive Director of the Cannabis Canada Association - told The Globe and Mail.

Rewak - whose organization represents a number of the country's biggest cannabis producers - says a formal submission opposing the proposed tax will be sent to Health Canada soon. The submission will suggest deferment for medical producers. But, as cannabis industry consultant Deepak Anand says, this could have unintended consequences for patients.

"I fear that this will cause larger licensed producers with multiple sites to allocate all medical production and sales to a specific site, which may as a result reduce the strain and product selection available to medical patients."

The proposed fee is intended to help the government cover costs associated with approving new production licenses, inspecting facilities and other regulatory enforcement activities. Health Canada has established a 30-day period for interested parties to comment on the tax plan. Of course the pricing of cannabis is a bit of a balancing act. If the price is too high, or too low, the black market will continue to flourish.

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