The Canada-EU Comprehensive Economic and Trade

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Policy Title: Removing Provincial Excise Tax on Medicinal Cannabis Issue On October 17, 2018, cannabis was legalized for recreational use in Canada, and Alberta implemented an excise tax on all cannabis products, including medical cannabis authorized by a physician. Before this date, medical cannabis was exempt from excise tax like other medications prescribed by a doctor. These new taxes will amount to a 24.3% excise tax from the province and 2.5% excise tax from the federal government i, increasing the excise tax burden on medical cannabis patients by 26.8%. BACKGROUND Prior to October 17, 2018 over 112,000 registered medical cannabis patients in Alberta only paid GST on their products to relieve symptoms from various conditions, including chronic pain disorders, arthritis, insomnia, multiple sclerosis, Crohn’s disease, and epilepsy. Many of these patients are often economically disadvantaged due to enduring chronic and/or debilitating illnesses which make them unable to continue regular employment. Medical cannabis users are provided authorization and oversight from registered physicians. In Alberta, these patients are required by the College of Physicians and Surgeons to follow-up with their physicians every 3 months. Physician oversight is beneficial to positive health outcomes, harm reduction, and treatment plans among medical cannabis patients. With the legalization of cannabis, an excise tax has been placed on all cannabis products, including medical cannabis authorized by a physician. The tax on medical cannabis was applied in Alberta despite polling demonstrating that the majority of Canadians do not support taxing medical cannabis. While medical cannabis requires a prescription like other medications, it is now subject to an additional tax burden that other medications are not. This new tax disproportionately affects patients without the economic means to pay for the increase in the cost of their medication. As of October 2018, patients in Alberta pay more tax on medical cannabis than in any other Canadian province: Federal Ad Provincial Ad Valorem Additional Rate GST/PST/HST Combined Tax Valorem Rate + Sales Tax Adjustment (if applicable) Rate Alberta 2.5% 24.3% 5% British Columbia 2.5% 7.5% 12% Manitoba 2.5% n/a 13% New Brunswick 2.5% 7.5% 15% Newfoundland and 2.5% 7.5% 15% Labrador Northwest 2.5% 7.5% 5% Territories Nova Scotia 2.5% 7.5% 15% Nunavut 2.5% 26.8% 5% Ontario 2.5% 11.4% 13% Prince Edward Island 2.5% 7.5% 15% Quebec 2.5% 7.5% 14.975% Saskatchewan 2.5% 13.95% 11% Yukon 2.5% 7.5% 5% Sources :https://www.fin.gc.ca/n18/data/18-084_2-eng.asp#_ftn1;https://canadabusiness.ca/government/taxes-gsthst/federal-tax-information/overview-of-charging-and-collecting-sales-tax/ 1

Applying any tax to medically prescribed cannabis is inconsistent with the taxation of all other prescription medicines, which are tax exempt and patients already pay sales tax on medical cannabis and are not eligible for reimbursement under most insurance plans in Canada. Removing the punitive and unfair excise tax on medicinal cannabis would encourage and incentivize patients to maintain interaction with their physicians as opposed to ‘self-medicating’ or substituting other prescription pain killers with significant harms, such as opioids or unregulated illicit market-cannabis. Maintaining a tax burden on medical cannabis is likely to lead to negative health outcomes across Alberta. Higher tax rates on medical cannabis will drive patients to seek out less expensive, more accessible alternatives such as prescription opioids, or illicit-market cannabis. Alberta is in the middle of an opioid epidemic currently, and right now it is easier for patients to be prescribed opioids and have it covered by insurance than it is for medical cannabis. In effect, this approach is directing patients away from medical cannabis towards more harmful substances. This is occurring despite evidence demonstrating that citizens of jurisdictions with greater access to legal cannabis (for medical and non-medical purposes) have lower rates of opioids prescribed and opioid associated mortality. ii The justification for the provincial taxation rate in Alberta was to charge an amount equivalent to what is collected in other provinces for medical and non-medical cannabis. However, it is clear from looking at taxation rates that Alberta has the highest provincial rate of taxation in Canada. Alberta medical cannabis patients pay a considerable amount more tax per standard order than counterparts in other provinces. Combined Tax Rates in Selected Provinces for average 30 gram purchase (10$/Gram assumed) Province GST PST Federal Excise Duty Provincial Excise Duty Total Tax/ gram $ 0.50 Alberta $ $ 0.30 $ 2.20 $ 3.00 Saskatchewan $ 0.50 $ 0.60 $ 0.30 $ 1.40 $ 2.80 British Columbia $ 0.50 $ 0.70 $ 0.30 $ 0.90 $ 2.40 Ontario $ 0.50 $ 0.80 $ 0.30 $ 1.30 $ 2.90 Quebec $ 0.50 $ 1.00 $ 0.30 $ 0.90 $ 2.70

Total Tax $ 90.00 $ 84.00 $ 72.00 $ 87.00 $ 81.00

Medical cannabis is regulated by Health Canada and distributed directly to clients from licensed producers. Suspending 24.3% excise tax on medical cannabis would not reduce current provincial revenues and would be consistent with the treatment of medical cannabis prior to October 2018. RECOMMENDATIONS The Alberta Chambers of Commerce recommends the Government of Alberta: 1. Revert to the medical policy that existed before October 2018 and exempt medical cannabis from any excise or revenue generating taxes.

i Cannabis Excise Duty Rates in Provinces and Territories: https://www.fin.gc.ca/n18/data/18-084_2-eng.asp#_ftn1 ii https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/information-medical-practitioners/informationhealth-care-professionals-cannabis-cannabinoids.html

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