The dollars and cents of cannabis...
Author: Ryan Greer, Director of Infrastructure & Transportation Policy, Canadian Chamber of Commerce
As of October 17, Canadian adults will be able to legally purchase and consume cannabis for recreational purposes; a year and a half after the federal government introduced its legislation to do so. It will mark the beginning of a fascinating battle between a new regulated industry and the existing illegal market that Canadians are currently turning to for recreational cannabis use.
So what are the steps to legalizing a multi-billiondollar illegal market? Over the last 18 months, federal
legislators and civil servants have been establishing a national framework for regulating access to
cannabis, which includes rules for cultivation, production, possession and marketing. Meanwhile,
provinces and territories have been busy setting the rules for distribution and retail sales. This has been accompanied by a frenzy of private sector activity to supply the legal market with licensed producers,
retailers, ancillary businesses and others investing billions of dollars in this new sector.
Some of the factors that will influence how effective Canada’s legal cannabis market is at reducing illegal sales include safety, quality, access, supply and branding. Like all markets, one of the biggest factors will be price. As the head of the federal Task Force on Cannabis Legalization and Regulation, Anne McLellan, told Members of Parliament studying the Cannabis Act, "Price point here is going to be key in terms of what you see in the illicit market and how effective the legal market is at moving people over.”
In late 2017, the federal government reached a cannabis tax revenue sharing agreement with the provinces and territories. On top of sales taxes, the agreement included a cannabis excise or ‘sin’ tax of 10% of the retail price or $1 per gram—whichever is higher. The 10% tax is expected to raise $300 million annually for the provinces/territories and $100 million annually for the federal government. The agreement projected that including the excise tax, legal recreational cannabis will be priced around $10 a gram.
Only a few months later, Statistics Canada released a survey that found Canadians are currently paying an average of less than $7 a gram for cannabis.
Health Canada proposed four ‘cost recovery fees’—otherwise known as user fees—on the industry to
recoup the costs the government will incur by regulating the sector. User fees are typically associated with a specific service from the federal government, such is the case with the first three of the proposed fees.
An annual regulatory fee of 2.3% of gross revenue for licensed producers was proposed, with a 1% fee for micro-cultivators and processors. The proposal is expected to put an additional $100 million into federal coffers every year. No clear policy rationale has been shared with industry for how government
determined the 2.3% fee level.
This additional tax (which is what the fee is), was also proposed after licensed producers had already negotiated multi-year supply deals with provincial wholesalers based on the previously announced 10% excise tax.
As others have warned, high government taxes and fees will hurt legal producers’ ability to compete with the illegal market and ultimately hurt Canadians as well, which runs counter to the government’s rationale for legalizing cannabis in the first place. There are other looming policy issues that will influence the
effectiveness of breaking up the illegal market. The government of Ontario’s recent decision to move from a sparsely populated government-run retail distribution network to a private retail model will increase the reach of the legal market in Canada’s largest province. Municipalities across the country will need to deal with the hundreds of unlicensed dispensaries that are operating outside the law to protect retailers who are investing and operating within new provincial rules. The federal government must also move quickly to establish regulations for the recreational production and sale of cannabis edibles, beverages and other
products that will remain in the hands of the illicit market after October 17.
Deloitte has forecasted that Canada’s cannabis market will be worth up to $7.17 billion in sales next year. To maximize the economic benefits to Canadians of this $7-billion market, governments must create an environment that supports businesses that are playing by the rules, so they can in turn create new jobs and investment, along with the significant tax revenue for governments that will follow.
Rate reductions in WSIB premiums in 2019
This is the culmination of a long time goal and request of the Ontario Chamber Network, including your Peterborough Chamber of Commerce.
According to the government, the WSIB will be able to cut the average premium rate for employers by almost 30 per cent, starting January 1, 2019. The rate reduction is the result of the elimination of the unfunded liability.
We welcome this announcement and the opportunity to reinvest in business and our Ontario economy. WSIB is often mentioned by our local businesses as a system that takes time and reinvestment opportunity away from their business.
“Premiums come out of the pockets of business owners. Today’s news means that this money saved can be better spent on job creation, new technologies and infrastructure, and better, safer workplaces," said Rocco Rossi, President & CEO, Ontario Chamber of Commerce.
The 3rd annual Peterborough Aerospace Summit was held recently at the Peterborough Airport. What we know about the aerospace industry is that it’s a growing field with many opportunities for our workforce. In fact, worldwide, the staff shortages anticipated in aerospace are staggering. The industry says it will be short 800,000 pilots, 750,000 maintenance staff and about the same number in cabin crew. The positive news is that with Seneca and Fleming College along with Trent University and the Holy Cross High Skills Major program in aviation, Peterborough is in a good position to help fill the need.
It’s important to recognize the role, the return on government investment and impact the airport has in our local economy. In 2017, 730 people were employed at the airport; up from 422 in 2008. The growth in jobs is also reflected in economic impact with the airport generating $74 million in GDP in 2017 and supporting 60,000 airplane movements. Most of the work is in maintenance, refurbishment and overhaul (MRO) of airplanes and the supply chain that supports those companies.
The Peterborough Airport is also making its mark as one of 11 regional airports in the Southern Ontario Airport Network (SOAN). The group is working toward understanding and planning to help Pearson International Airport as it reaches capacity. Across the network, the regional airports support 55,000 jobs in Ontario and pay about $2.3 billion in taxes.
But at a time when the industry is taking off, there are also some barriers that need to be addressed.
Training the workforce
Experts believe building a workforce will require more co-op opportunities and awareness of the industry and potential jobs at an earlier age, perhaps Grades 5 or 6. Part of the panel discussion at the Summit identified the various types of work available in the industry from pilots to maintenance crew to finance managers, marketers and HR staff.
That said, for those looking to enter a growth industry, Canada has the 7th largest aerospace industry in the world, with 29% of Canadian aerospace jobs in Ontario. 95% of Ontario aerospace companies have fewer than 100 employees, which means an employee can potentially get in on the ground floor. These are also the types of companies that Canada needs to scale and grow in burgeoning industries with high-paying jobs.
Recently, Flying Colours Corporation announced its $30 million expansion which will include an additional 60 jobs.
Filling in the last mile
In many cases, the regional airports are geographically set apart from the community they are connected to, including Peterborough. There are currently no transit stops to this local employment hub and employees and students are walking and cycling to work. Considerations for new transit routes will help this economic driver continue to grow and open the doors for employees. Several committees examining transportation in the region have identified this issue as one that requires attention.
At the federal chamber level there is a lot of discussion around airports with a series of policy resolutions on the books from how they operate and can access funding to improving security wait times. That these discussions are constant is an indication that there is a role for air in our transportation mix and now is the time to ensure it soars.
SEMPTEMBER 19, 2018, PETERBOROUGH: The Peterborough Chamber of Commerce is releasing its the ‘Building a Community Outside the Ordinary’ platform for the upcoming municipal election. The platform outlines three pillars of a strong, resilient community and includes ten recommended actions that are needed to support the development of opportunities for everyone in the City and County of Peterborough.
The ‘Building a Community Outside the Ordinary’ platform has been developed through consultation with Chamber member businesses who identified several factors that are limiting our ability to provide opportunity for our citizens. To become a city and county for everyone, we need our candidates and the next council to support a “culture of forward and full circle thinking”.
The ‘Building a Community Outside the Ordinary’ platform calls for:
Strengthening Peterborough’s Competitiveness, Economic Growth and Job Creation through commitments to:
Building Whole Communities through commitments to:
Improving Government Accountability through commitments to:
“We are asking all candidates for City and County Councils to endorse our ‘Building a Community Outside the Ordinary’ platform,” says Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. “We believe that by adopting the pillars of strengthening Peterborough’s competitiveness, economic growth and job creation, building whole communities, and improving government accountability, our next Councils can build a community outside the ordinary for everyone.”
What's going on with Bill 148?
We’ve mentioned it before and we’re saying it again, business likes certainty. However, for a very long time certainty has been elusive for the business owner.
The Bill 148 legislation came into effect January 1, 2018. Before hand there was concern. Businesses had a very short time frame to institute some major changes. There was no economic analysis done by
government to understand the impact of so many changes all at once. Several independent groups , including the Ontario Chamber of Commerce, issued analyses that predicted job losses of between 50 -100,000 over the next two years because of the reforms.
A survey of the Peterborough Chamber membership painted a wide array of impacts and reactions, including increased prices, decreased hours, and a lot more automation. We also heard that businesses made the changes and well, got on with business. As always there are different levels of impact. The feeling from the economic analyses and those in business is that the true impact of the changes won’t be seen until one or two years after implementation.
With the change in government we've been asked what will happen with this legislation. The short
answer is, it will remain in place. That said, one of Premier Ford’s campaign promises was to stop the second minimum wage increase, from $14 to $15, in the Bill 148 legislation. In order to do so, the legislation must be brought forward to Queen’s Park and opened to make the change. In most cases, legislation is reviewed every five years or so, but now there is potentially an opportunity coming up to get in and make changes.
The Chamber’s number one concern with the Bill 148 legislation was the speed at which it came into effect and the depth and breadth of impact in the business community. We constantly speak about the piling on effect or cumulative burden. Bill 148 introduced a significant amount of new rules, regulations and costs, on top of increased hydro rates, gas prices, and various federal regulations. Bill 148 was also intended to improve the economic prospects for the most vulnerable members of society, but it placed the burden almost squarely on the shoulders of the business community, as though we are an endless source of wealth. In addition to a longer implementation of Bill 148, the Chamber lobbied hard for income tax measures for the lowest income earners, and the completion and consideration of the Basic Income Guarantee study. This study, which included the City of Kawartha Lakes has now been cancelled, a missed opportunity for significant change in how we treat our most vulnerable.
The Ontario Chamber of Commerce, along with several other organizations is calling for a full repeal of Bill 148. We are asking our members to provide us with some feedback as to how they are coping with the legislative changes, and the increased costs. What are some of the mitigation measures they’ve implemented, and what do they anticipate will be the long term impacts? We are also curious to know if there are specific areas that need to be changed or receive further consideration should the legislation be opened up.
The Peterborough Chamber of Commerce is looking for feedback on the impact of Bill 148 on the business community.
We've built a short two question survey that is looking for what has changed, if anything, in the past eight months since the legislation came into effect.
We are also asking for input to present to the provincial
government should they reopen or solicit feedback on potential changes to the legislation.
Businesses, please take a moment to fill out the survey. It will help us best serve the advocacy needs of our business community.
Thank you for taking our survey.
Questions about Bill 148? Check out our advocacy page.
In a few weeks, chambers of commerce and boards of trade from across Canada will be gathering in Thunder Bay to discuss and debate how to influence federal public policy. It’s fitting that this year’s Canadian Chamber of Commerce (CCC) Annual General Meeting is happening in a city that’s fairly close to being the middle of our country. Now more than ever Canada and Canadian businesses need to band together behind common values and ideals of how to move our economy forward.
Between NAFTA negotiations, newly inked trade agreements CETA (Comprehensive and Economic Trade Agreement) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, interprovincial challenges, regulatory regimes and the desire for business tax reform by the federal
government these are challenging times.
Earlier this year the CCC issued the 2018 version of “10 Ways to Build a Canada that Wins” and as our national meeting approaches, this document is worth revisiting as it will be a guide for advocacy.
In fact, a quick scan of the 10 ways and you can see how each could be connected to the economic climate in the City and County of Peterborough. Here’s a look at a couple of them as we profiled them earlier this year.
Make Canada an Agri-Food Powerhouse
“Canada’s agriculture and agri-food sector has a strong and well-earned reputation for efficient production, innovation, food quality and safety that has propelled Canada to be the fifth largest exporter of agricultural
and agri-food products in the world.”
The CCC report goes on to say that the agri-food industry, from primary producers to advanced food manufacturers to agri-food based technologies to data analytics accounts for 7% of GDP and one in eight jobs across the country.
In 2018, the Chamber Network will focus on championing a more integrated approach involving federal and provincial governments in the development of policy in this area. There is also a continued desire to work with the government to develop a long-term vision for growing Canada’s agri-food sector.
On the economic development front in Peterborough, Peterborough & The Kawarthas Economic
Development Agriculture Advisory Committee has identified three priority areas for 2018:
Develop Agile Workforce Strategies
Accessing talent has been identified as one of the biggest challenges to business competitiveness in
Peterborough and across the province. The ability to make a difference in this space requires targeted strategies at all levels of government. Among the policy areas identified as priorities from the CCC and Chamber Network are workforce strategies that:
Helping SMEs Trade and Grow
We know and previous studies and research have told us that Canada, is really good at starting companies, but where we fall short is in our ability to grow those companies into medium or even large businesses.
In the CCC document we learn that 99% of all businesses are SMEs and that SMEs contribute 25% of all goods and services and yet exports less than a third of Canada’s GDP.
Encouraging companies to scale up and become global leaders requires a host of tools including funding programs, tax and regulatory policy that enable easy and low-cost compliance and programs that
continue to connect SMEs to domestic and international business opportunities.
Businesses will always be up to the challenge to build a “Canada that wins”, looking for new ways to grow and reach new customers and markets, but governments and policy makers cannot lose sight of the importance of a policy climate that allows for business success.
In just over three weeks, chambers of commerce and boards of trade from across the country will be meeting in Thunder Bay.
Overall there will be nine policy resolutions on tax policy, including one from the Peterborough
Chamber co-sponsored by the Chambre du Commerce du Montreal Metropolitan and the Port Hope & District Chamber of Commerce.
The resolution titled "Bridging the Digital Tax Divide to Ensure a Fair and Equitable Fiscal Environment for All Businesses" offers three recommendations to the federal government:
1. Examine how to apply VAT evenly and predictably across provinces and sectors in a digital world, including an assessment of potential revenue from foreign digital companies.
2. Require foreign digital companies to charge an appropriate provincial VAT (e.g. GST/HST) on sales related to the purchase of their services in Canada and remit the revenues from these taxes to the proper tax authorities.
3. Require foreign digital companies to register with the Canada Revenue Agency.
Delegates will be voting on the resolutions September 23 and 24.
The last time Canada undertook a comprehensive review of its tax system, humankind still hadn’t set foot on the moon. In the five decades since, a cut-and-paste approach has made Canada’s tax system more cumbersome and inefficient.
As the voice of more than 200,000 businesses, the Canadian Chamber of Commerce is launching a project that will build the case for a comprehensive review of Canada’s tax system.
“Our complex and burdensome tax system is driving away investment and eroding Canada’s competitiveness,” said The Hon. Perrin Beatty, President and CEO of the Canadian Chamber of Commerce. “Canadian companies face serious competitive pressures from other jurisdictions that are aggressively acting to help their businesses grow and compete globally. To ensure Canadian businesses are not completely out of the game, our government needs to launch a comprehensive review of our taxation system to make it simpler and more modern, and to reduce compliance costs for business of all sizes.”
The project being launched today will be led by Dr. Trevin Stratton, the Chamber’s Chief Economist, and will include a series of roundtables that will bring together business leaders and other stakeholders to discuss the challenges Canada’s current tax system creates for businesses, innovators, and job creators.
“Canada’s declining tax competitiveness impacts all aspects of Canadian business, from cross-border supply chains, our ability to attract investment, to hiring and talent retention, as well as mergers and acquisitions,” said Dr. Stratton. “While we are focused on making the case for a comprehensive review of the tax system, we also recognize there are measures that government can implement right now to improve our competitive positioning.”
“For example,” Dr. Stratton added, “allowing businesses to fully expense the cost of new machinery and equipment in the tax year the investment is made or simplifying the delivery of benefit programs. Through this process we will also be advocating for changes like these that can help businesses now.”
The Chamber’s efforts will be supported by Canadian taxation experts, some of whom who will form the project’s Tax Advisory Panel. The panel will include:
Dr. Trevin Stratton – Chief Economist, Canadian Chamber of Commerce
Bruce Ball – Vice President, Taxation, CPA Canada
Fred O’Riordan – National Leader, Tax Policy, Ernst and Young
Guy Legault – President, Conference for Advanced Life Underwriting
Victor Gomez – Director of Government and Regulatory Affairs, Sun Life
The Chamber will issue a full report making the case for a comprehensive review of the tax system, along with recommendations for some immediate steps government can take to improve Canadian
competitiveness in advance of the 2019 election.
Learn more: chamber.ca