Ontario’s Licensed Cannabis Producers Lose Revenue to Black Market

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Adult cannabis sales in Canada are in the weeds.

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A report by Ernst and Young, commissioned by the Cannabis Council of Canada, found licensed producers in Ontario saw their share of sales revenue drop to 60.8% in April 2022 from 74.2% in July 2019.

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The report focused on how the regulation and taxation of cannabis raises questions about the viability of the industry if the government does not help the industry find solutions.

Suggestions include reducing and harmonizing provincial and federal excise duty rates.

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Also have an outreach program to educate the public on the risks of unregulated products and crack down on illegal sales.

Recreational cannabis was legalized in Canada in the fall of 2018.

The legislation aimed to deny access to young people, protect public health by providing adults with safe cannabis products and keep criminals out.

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The report now says – with the industry expanding – that optimism is fading and the illicit trade continues to thrive, depriving the legal industry of revenue.

“No one could have predicted the onset of a global pandemic and the impact it would have on storefront outlets,” the report said. “But the root cause comes down to a playing field steeply tilted in favor of an illicit market. Producers and legal sellers must comply with a myriad of government regulations and pay federal and provincial taxes — rules that illicit players do not respect.

“The legal industry has adapted in several ways to remain competitive. Producers have streamlined their operations to gain efficiency and lowered their prices to attract consumers. But that has left many struggling for profitability, with some being pushed to the brink of bankruptcy. The price squeeze hasn’t had nearly the same effect on government revenue since most cannabis taxes are volume-based, not price-based.



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