ENABLING BC'S CANNABIS ECONOMY (2025)

Issue

BC’s Cannabis industry is facing severe economic challenges due to excessive taxation, burdensome regulations, and a lack of enforcement against illicit operators.

It’s estimated that in 2024, sales of regulated cannabis reached or exceeded $6 billion[1] and BC is already home to some of the industry’s most celebrated brands. Despite significant growth and early optimism, BC’s best operators remain unprofitable. The reasons for this are numerous and complex but can be summarized as: 

• Excessive taxation 
• Illicit Market Pricing
• BCLDB’s 15% “Proprietary Fee” 

The federal government legalized cannabis to increase public safety, displace the illicit market, and stimulate the economy. The challenges currently facing BC’s regulated cannabis industry directly undermine those goals. To ensure BC’s regulated cannabis industry survives and becomes a meaningful contributor to the provincial economy, new policies are urgently needed. 

Background

Taxes & Fees 

The federal excise tax structure of $1 per gram was established with the assumption that the average wholesale price would be $10 per gram. However, the average retail price in 2024 was $4.82 per gram, meaning the industry is taxed at more than 3 times the intended rate. This presents a significant financial challenge for cannabis producers while making it harder to remain competitive with an illicit market that competes primarily on price. 

The BCLDB introduced their Direct Delivery program with the stated intention of helping BC’s small cannabis producers. This program allows qualified producers to sell products directly to retail stores, effectively bypassing the wholesale function of the BCLDB. Unfortunately, in lieu of the 15% wholesale markup they normally collect, the BCLDB collects a 15% “Proprietary Fee”. By allowing smaller producers to perform the role of a wholesaler without allowing them to be paid for it, they put smaller producers at a disadvantage and undermine the program’s goal.

International Markets 

As international markets like Australia, Germany, and Israel continue to open and expand, international buyers are finding their way to BC’s best producers and offering top dollar. Export sales aren’t subject to excise tax, meaning every gram of cannabis that’s exported is $1 in excise tax not collected. If the international market continues to offer the best pricing and excise tax policies remain unchanged, producers will continue to prioritize the international market[2] and fewer total dollars will be collected via excise tax. 

Despite legalization, many cannabis businesses still face difficulties obtaining standard financial services, including everyday banking, loans, and payment processing. Where financing is available, it often comes with higher interest rates and fees, sometimes referred to as a “cannabis tax.” Meanwhile, insurance options remain limited and costly, leaving operators underinsured and at risk.

Vaping

The manufacturing, distribution, and sale of inhalable cannabis products are already highly regulated for public safety and youth protection. The additional 20% tax on cannabis vape products—introduced in response to nicotine vape concerns—unintentionally encourages illicit sales by inflating legal prices. Overall, regulations, bylaws, and taxes drive up costs for licensed cannabis businesses in BC to the point where the infrastructure needed to support multiple stores may outweigh their profits.

Retail Access 

Some BC municipalities effectively block private cannabis retailers by refusing to pass zoning bylaws or imposing restrictive rules that only government-run stores can meet. A province-wide zoning framework—respectful of First Nations and Indigenous participation—would ensure equitable access for private operators, while requiring communities with existing bylaws to permit reasonable private retail. 

Health & Safety

In 2023, Health Canada launched a Cannabis Data Gathering Program[3] to help generate baseline data on total THC levels, heavy metals, mycotoxins, pesticides, and microbial contaminants for cannabis products from both sides of the Canadian market. Results were published in February ‘25 and included several important findings. Nearly all (94%) of illicit samples tested positive for multiple pesticides with the most common being myclobutanil. In comparison, only 2 licit products showed trace amounts. Illicit samples were found to have significantly higher levels of microbial (mould) contamination, often exceeding European Pharmacopeia limits. The report also showed 6 of the illicit samples tested contained mycotoxins while none were found in licit products.

These findings demonstrate the importance of regulated cannabis products, especially as it relates to product testing and product quality. They also emphasize the shortcuts being used by illicit producers and how these shortcuts have become a direct risk to public health and safety.

Illicit Market Pricing

One of the biggest obstacles to the viability of the regulated cannabis industry is the illicit market’s ability to undercut the regulated market on price. Operating outside the legal and regulatory framework, illicit producers, processors, and retailers avoid taxes, provincial markups, and other regulatory burdens, allowing them to offer significantly lower prices for potentially harmful products while diverting customers away from the regulated market. 

A study by the University of Montreal[4] on the acceptance of cryptocurrencies by online cannabis retailers in Canada revealed that most illicit operators preferred e-transfers, despite the digital trail such transactions leave. Researchers attributed this practice to a lack of enforcement, suggesting that illicit businesses perceive the risk of enforcement to be low.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Remove the 15% “Proprietary Fee” charged by the BCLDB on orders placed and delivered within BC’s Direct Delivery program. Doing so will allow BC’s small producers to be paid for providing the services of a wholesaler while encouraging an improved ecosystem for producers and retailers. 
2. To date, the BC Government has collected more than $396M in cannabis excise tax. Allocate a small portion of this income to fund a BC Cannabis Jobs Tax Credit that will let BC’s cannabis industry hire some much-needed help while creating skilled, stable jobs in rural communities across the province.
3. Declare support for the recommendation made by the Federal House of Commons Standing Committee on Finance to move excise tax to a 10% ad valorem rate. Excise tax remains the federal government’s responsibility, but clear support from our provincial government is needed for the federal government to act quickly.
4. Increase enforcement of illicit production and sales to ensure their lower costs can’t be used to undercut the regulated market on price with products that are a proven risk to public health. If monitoring and enforcement of the regulated industry continues to exceed that of the unregulated industry, the unregulated industry will continue to thrive.

That the Federal Government:

5. Adopt the recommendation made by the Federal House of Commons Standing Committee on Finance to move the excise tax rate to a 10% ad valorem rate. If the intention is to create a regulated cannabis industry that is economically viable, without question, this is the single most important policy change.
6. Adopt a single excise stamp across all provinces. Doing so would help streamline operations and inventory management, reducing the regulatory burden without compromising the requirements or benefits of Canada’s excise tax program.