Evidence of meeting #146 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fuel.
A video is available from Parliament.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
What we're talking about are derivatives. The derivatives are not subject to the excise tax, but medical marijuana is subject to the excise tax. Is that correct?
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
That's correct, but—
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Okay, so that brings me back to my original question of whether or not you have a model or did an evaluation on how much the cost would be for the excise tax for medical marijuana.
I raise this. It's no small issue. We're having some debates around pharmacare in this country. We already know that many Canadians can't afford their basic medication—one in five Canadians. If what we're doing is cutting the access to medical marijuana for people who can't afford to pay for it in the absence of a pharmacare program, that's actually a fairly significant issue. If they can no longer access their medical marijuana, the additional charge is simply too much for them, then it means that they're going to have to cut back on their medication or do other things, as people do in this country when they can't afford their medication.
Is there a sense of how much money would be involved in exempting that excise tax for medical marijuana that's not in a derivative form?
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
The numbers that were included in the budget did not break down into that separation. These are all new realities that we are facing.
There is a lot of work going on with Health Canada, including in respect to drugs that may be approved in the future, with the DIN numbers. The government has announced in the budget that it will be examining options for establishing, potentially, a rebate program to retroactively reimburse Canadians using cannabis for medical purposes, an amount that would be in recognition of the federal portion of the excise duty that may be imposed on equivalent products before the completion of the program. There is still work that is being undertaken in this area by the government.
In terms of a specific analysis with Health Canada, there is no number that I have in my possession that I could provide a comment on today.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
May I ask you this, then. We had some questions yesterday that we'd like you to bring back as well. I apologize for burning the midnight oil, but these are important facts as we consider this bill, and prior to witnesses coming forward as well. If you could come back with some numbers in terms of the impact on access to medical marijuana, that would be helpful.
I certainly understand the government may be looking at other solutions, but I think for this finance committee to know to what extent access to medical marijuana is being cut off or rendered more difficult, because of the imposition of a tax that doesn't include, as an exemption or an exception, medical marijuana, would be very helpful for this committee. I'm sure I'm not the only one around the table who knows people who have medical marijuana prescribed to them. It's a huge, significant cost in the absence of pharmacare. Having that cost increase is something fairly significant that I think we would well want to know more about as we go through the various steps of potentially amending the legislation.
Liberal
The Chair Liberal Wayne Easter
Medical marijuana is in use at the moment. A number of veterans certainly use it. What's the situation now? Is there an excise tax on medical marijuana now, or is this just what's...? I should know that answer, but I don't.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
Currently there are no excise duties that are applied to marijuana for medical purposes, but in the GST/HST framework, the general sales tax does apply to medical marijuana. In that sense the excise duty treatment that is proposed is not a departure from GST/HST policy. Again, there's the DIN test, so products that are only used for medical purposes, upon prescription, will not be subject to the excise duty.
Correct me if I'm wrong, Pierre, but the same treatment would also apply from a GST/HST standpoint. Those products with a DIN that currently exist, that will be approved in the near future by Health Canada, will not be subject to both the excise duty and the GST/HST framework.
Pierre Mercille Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Can I...?
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Mr. Coulombe, thank you for your presentation on Part 3.
Could you explain to the committee how the department determined the penalties that are proposed for offences committed by cannabis licensees, or offences that are related to the cannabis tax stamps, as well as for other offences? Could you provide some information on that?
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
Yes, of course.
First, I have to tell you that this is very technical. Basically, there are scales to calculate the percentage of duties that are not correctly remitted. We went by the fee scales that already exist for tobacco taxes. If memory serves, I believe that between 200% and 300% of duties are not properly remitted. Under the Excise Tax Act, 2001, there were already penalties for offences. We basically aligned our regime on that one so as not to reinvent the wheel.
We added a new part to the Excise Tax Act, 2001, to control the production of cannabis, and then we made changes to the parts of that act that involve offences and penalties related to the production of tobacco, alcohol, wine and so on.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
You just answered my second question. It's a good idea to compare this to tobacco products. If I understood you correctly, the penalties are to two to three times higher.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
I'm talking about the duties.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
But the penalties are comparable to those that apply to tobacco production, are they not?
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
That is correct. The penalties are comparable insofar as the fee scales are concerned. I don't have the figures in front of me but I think Mr. LeBlanc has them.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
You spoke about 200% or 300%.
That is in the Canadian context, but did you compare the penalties to those that apply in American states, such as Colorado or Oregon? Are ours still two or three times higher than the same penalties for tobacco-related offences?
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
We made these comparisons especially to ensure that the basic tax measure at the outset, which is the dollar per gram, would not result in an overly high taxation level, which would run counter to the government's objectives. The government wants to get rid of the illegal market, establish a robust and legal market to protect youngsters, and ensure that profits from cannabis will not fall into the hands of criminals.
In studies done over the past year, some analyses were carried out to establish the parameters on which offences would be based. As for the excise tax on cannabis production, we first of all looked at the existing parameters for tobacco and alcohol in Canada.
Liberal
The Chair Liberal Wayne Easter
Anyone else over here? Mr. Julian, are you ready again? Do you have more questions?
NDP
Peter Julian NDP New Westminster—Burnaby, BC
I will when we get the information back. Mr. Chair, I'm a little bit in your hands.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
We need that information back. Yes, I think I would like to ask a question.
Liberal
The Chair Liberal Wayne Easter
Just so that we're clear, you're basically asking what would the excise tax be from recreational marijuana and what would the excise tax be, estimated roughly, from medical marijuana that doesn't have a DIN.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
It's for the non-derivative medical marijuana and what the overall increase in cost will be with these budgetary measures and, second, in terms of the model, what the government intends to raise from the excise tax on medical marijuana. I think that's valuable information for us to have prior to our witnesses, but also prior to the amendments that we'll have to consider for this budget bill.
Liberal
The Chair Liberal Wayne Easter
Thank you.
I hear no further questions for part 3.
Do we have agreement to stay here until about 10 minutes before the vote?
Okay. We'll invite the witnesses for part 5 to come forward. We'll start that and see where we end up. We may have some time after the vote. If not, we'll have to call you back.
We have Mr. Coulombe again; Mr. Turner, who is a Tax Policy Analyst; Mr. Mercille, who is Director General, Sales Tax Division; Mr. Giguère, Manager of Legislative Policy; and Ms. Meltzer, who is Director General of the Carbon Pricing Bureau. I think we have you all.
The floor is yours. I'm not sure who is going to open it up and make the presentation, but we'll hear the presentation and see how long we have.
Welcome.