Comparing two cannabis tax-base systems: Lessons learned from legal cannabis products sold in Ontario, Canada
Abstract
Aims To examine the price and tax structures of cannabis products sold in Ontario to inform the government on how to improve the policy on the cannabis tax base from a public health standpoint.
Design Economic evaluations to assess price and tax structures of various cannabis products
Setting Ontario
Participants Data of cannabis products sold in Ontario regarding the Ontario Cannabis Store (OCS)’s buy and sell prices and product characteristics, including the product’s type, quantity per package, and quantity of THC and CBD. The OCS provided data on 2,601 units of cannabis products in March 2022.
Measures Measures examined include the harmonized sales tax, the seller’s markup, the producer’s price, the flat-rate tax, ad valorem tax, effective excise tax, provincial adjustment tax, and excise tax per mg THC. The percentage of each tax compared to the retail price is also calculated.
Findings A flat-rate tax of $1 per gm of 10% THC flower produces a tax of $0.01 per mg THC. Taxing cannabis products based on gm of dried flower results in high-THC products being taxed at a lower rate. Evidence showed that product categories with types and potencies that had lower taxes rates per mg THC imposed upon them had more product varieties.
Conclusions The Ontario government should consider changing the tax base from the current one based on gm of flower to one based on mg of THC. Moreover, indexing the flat-rate tax to inflation is important to prevent the tax’s flat rate from becoming lower over time.
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