The government has undertaken to authorize regulated and restricted access to cannabis to keep that substance out of the hands of young people and to deprive criminals of the profits that derive from the cannabis trade. To do so, it will have to keep duties at low levels and cooperate with the provinces and territories in pursuing a coordinated taxation approach.
Statutory amendments to the Excise Tax Act, 2001, associated with the new federal excise duty framework, were implemented by Budget Implementation Act, 2018, No. 1.
The federal government subsequently signed agreements with most provincial and territorial governments to implement a coordinated taxation framework for cannabis. Regulations outlining the additional excise duty rates for each provincial and territorial signatory to the coordinated framework were announced on September 17, 2018.
The entire framework came into force on October 17, 2018, on which date non-medical cannabis became available for legal retail sale. Currently, cannabis products are generally subject to a combined federal-provincial tax that is not to exceed the higher of $1 per gram or an ad valorem rate of 10% of the producer’s selling price.
Clause 63 of part 3 implements amendments to the Excise Act, 2001, to introduce an anti-avoidance rule relating to the rules for establishing the value of a cannabis product on which the ad valorem duty is calculated to ensure that the cannabis duties are calculated on the appropriate value in certain circumstances.
In particular, this technical amendment would ensure that the ad valorem duty applies as intended on the producer's set price of the cannabis product or on the fair market value of the product in the case of a non-arm's-length transaction. To align with the announcement of the regulations, this measure is deemed to have come into force on September 17, 2018.