Why Canada's cannabis tax is under pressure

A large share of what you pay for legal cannabis is tax. That structure is now under real pressure to change, and it could eventually affect what you pay.

How the tax works today

The federal excise tax on dried cannabis is set at $1 per gram, or 10% of the price, whichever is higher. Back at legalization, when legal prices were high, the 10% usually applied. Prices have fallen a lot since then, so on most products the flat $1 floor now kicks in instead, and $1 on a cheap gram is a far bigger bite than 10% would be. Add provincial markups on top, and roughly 40 cents of every dollar spent on legal cannabis ends up with government.

Why the industry is pushing back

For licensed producers, excise is often the single largest expense, ahead of growing, packaging, or staff, and some lose a heavy share of their sales to it. Industry groups, a House of Commons finance committee, and the federal Cannabis Act review have all recommended the same fix: drop the $1 per gram floor and move to a flat 10% rate, the way it was first envisioned. The reasoning is that the current structure squeezes legal producers and makes it harder for them to compete on price with the untaxed illegal market.

What it means for you

Nothing changes overnight, tax reform moves slowly. But it helps to understand why legal prices sit where they do: a big chunk is tax, not the product itself. If the rate does shift to a flat 10%, it could ease pressure on legal prices over time and narrow the gap with the illegal market further. For how prices compare today, see why prices vary by province.

Sources

• StratCann, House of Commons finance committee calls for cannabis tax changes
• MJBizDaily, Cannabis Act review suggests excise tax reform
• Canada Revenue Agency, Cannabis excise duty framework