Health Canada Considers Cutting Marijuana Regulations After Numerous Bankruptcies in Industry: Report

A marijuana plant is seen in Vancouver in a file photo. (Don Mackinnon/AFP/Getty Images)

Following numerous bankruptcies of marijuana businesses, Health Canada announced on March 25 that it is considering cutting regulations on the industry.

Growers, wholesalers, and retailers are blaming federal taxes and regulations for ruining the licensed cannabis industry, as first reported by Blacklock’s Reporter.

“The legal cannabis industry has matured, the marketplace has evolved, and there is increased knowledge and data on public health and public safety risks associated with certain activities,” the health department wrote in a legal notice.

“Health Canada is seeking feedback on potential amendments to the Cannabis Regulations for regulatory burden reduction while still addressing public health.”

According to a regulatory impact analysis statement, Health Canada recognizes there may be regulatory measures that “could be made more efficient and streamlined without compromising the public health and public safety objectives in the Cannabis Act.”

Health Canada is considering potential amendments to the Cannabis Regulations that would streamline and clarify existing requirements; eliminate inefficiencies in the regulations, such as duplications between requirements; and reduce administrative and regulatory burdens where possible.

Regulatory amendments would target the five key areas of licensing, personnel and physical security measures, production requirements for cannabis products, packaging and labelling requirements for cannabis products, and record-keeping and reporting for cannabis licence holders.

Health Canada said it is also interested in feedback on regulatory measures that may be “duplicative, redundant, or particularly onerous, and where there are opportunities to promote efficiencies.”

No deadline was set for any red tape reduction measures.

According to bankruptcy court figures, since 2020, 34 marijuana corporations have become insolvent in Canada. Back in February, cannabis giant Canopy Growth announced it would be laying off 800 employees and closing a key facility due to concerns about long-term growth.

George Smitherman, CEO of the Cannabis Council of Canada, told reporters on Parliament Hill on Feb. 15 that more closures and consolidations are likely to follow. He added that there are about 300 licensed producers that have an account with Canada Revenue Agency to remit excise tax, and that 70 percent of those companies “are in default of those payments.”

Smitherman said regulatory mandates, fees, and taxes “make our industry largely unsustainable” despite marijuana legalization. “If you put up your hand and say you’re willing to be regulated, they have every fee and tax for you,” he said.

At the House of Commons agriculture committee last June 20, cannabis growers said there was little profit to be made in legal marijuana. “There is more money in a winery,” testified Timothy Deighton, owner of Sweetgrass Cannabis Ltd. based in Ymir, British Columbia.

Deighton said it took his company 11 months to get licensing approval to legally sell marijuana products. He then paid $100,000 to comply with security requirements, he said. Upon legalizing marijuana in 2018, Parliament taxed it at $1 per gram, about 15 percent, plus GST.

Ontario Conservative MP Dave Epp told the agriculture committee it was evident that the experiment with legalization had failed. “Neither of the two stated objectives—basically the reduction of organized crime and the reduction of the black market—have occurred,” he said.

According to a Statistics Canada report released Feb. 24, sales of recreational cannabis by provincial authorities and other retail outlets totalled $4 billion in the 2021–22 fiscal year. The federal and provincial governments earned a total of $1.6 billion from the control and sale of recreational cannabis that fiscal year ending March 31, 2022, including net sales income, taxes, licences, and permits.