Unpaid cannabis regulatory fees continue to climb in Canada

By Matt Lamers, International Editor
July 7, 2023

---

Unpaid regulatory fees owed by cannabis companies to Canada’s federal government jumped more than 200% from a year earlier, to almost 4 million Canadian dollars ($3.1 million) as of the end of March, MJBizDaily has learned.

The overdue fees have grown every year since 2019, as cannabis businesses licensed by the federal government struggle under the weight of taxes, fees, an intensely competitive market and poor business decisions.

For the 2022-23 fiscal year, the fees in arrears grew to CA$3.9 million, 225% more than the previous fiscal year’s CA$1.2 million, according to new figures shared with MJBizDaily by Health Canada.

The outstanding funds are only for the annual regulatory fee applied to licensees.

Proceeds from annual regulatory fees are used by the government to cover the costs associated with regulating the cannabis industry, such as paying hundreds of federal employees.

The annual regulatory fee generally amounts to 2.3% of a company's gross revenue.

Canada's cannabis excise tax, which is also applied to gross revenue, is separate from the annual fee.

Industry executives have criticized the government for what they say are excessive fees and taxes.

In fiscal 2021-22, for example, various levels of government collected more than CA$1.5 billion from the cannabis industry via excise tax, other taxes (such as sales taxes) and various fees.

Industrywide wholesale sales - the main source of revenue for most licensed cultivators - was only CA$3.1 billion that year.

In addition, government-owned marijuana wholesalers such as the Ontario Cannabis Store - which collectively represent the most profitable firms in Canada's cannabis industry - have applied markups of up to 45% on private marijuana companies that buy their products for retail sale. (The OCS is lowering its markup on edibles from 45% to 25%.)

Those kinds of margins, when considered with taxes and fees, leave little for private business, industry executives say.

“We’ve seen in Smiths Falls, Ontario, and Olds, Alberta, the consequences of an administration of fees and taxes which makes our industry largely unsustainable,” George Smitherman, CEO of the industry group Cannabis Council of Canada, said during a news conference in Ottawa, Ontario, earlier this year.

Smitherman was referring to 800 employees in Smiths Falls who were let go by Canopy Growth as well as 85 jobs in Olds cut by Calgary, Alberta-based producer and retailer SNDL.

“Everywhere you look, someone’s put up a fee or a regulatory barrier or burden that in the collective sense is making it impossible for our sector to make the progress that was expected and sustainable in the long run.”

The growing amount of unpaid government fees accumulated by licensed producers is no surprise to Mitchell Osak, president of Toronto-based Quanta Consulting.

“Fundamentally, LPs are overtaxed and overcharged with fees in a very hostile operating environment,” he told MJBizDaily.

‘The financial rooster may finally be coming home to roost for many of them.”

Osak suspects many companies are likely months, if not weeks, from failing.

“The LPs don't have the money to pay (the government) on time, when more mission-critical business needs like payroll are staring them in the face," he said.

"Realistically, many of these fees won't ever get paid to the government because the companies will go out of business.”

Osak said another factor might be fueling the growing amount of unpaid fees.

“Cost-cutting measures have led to the pruning of back-office staff as well as turnover,” he said.

“This has created a situation where fewer or less trained people have to do the same amount of financial management work.

“Payment delays in some companies simply comes down to accounts-payable processing or approval delays.”

Osak also said some licensed producers might be refusing to pay out of sense of grievance and anger with the government

Health Canada’s fees

Health Canada says it charges four cannabis-related fees to marijuana business license applicants and licensees to recover program costs.

Those four fees amounted to CA$75.7 million in revenue in 2021-22, according to the health department's latest annual Fees Report.

The annual fee accounted for the vast majority of all cannabis-related fees collected.

In the 2020-21 fiscal year, the annual fees amounted to CA$71.1 million, or 95% of Health Canada’s cannabis business fees.

Three of the fees are for what Health Canada calls “transactional” activities, meaning for one-time events, including:

• Application screening.
• Security clearances.
• Import/export permits.

Those fees cover a single application or permit and are nonrefundable.

Health Canada told MJBizDaily it begins work on application screenings, security clearances and import/export permits only after an invoice is paid in full.

As a result, these fees do not have arrears because they must be paid ahead of time.

“These fees are charged to recover the costs incurred by Health Canada and the Royal Canadian Mounted Police to perform the service being requested,” a spokesperson for the health department told MJBizDaily via email.

The annual regulatory fee is intended to recover the remaining costs of administering the Cannabis Act and its regulations.

The fee is invoiced each fiscal year, which runs April 1 to March 31.

The fee is required to be paid by Sept. 30.

Insolvency filings

The insolvency filings of an increasing number of cannabis companies provides clues as to how much money Canada’s federal government is missing out on in the way of taxes and fees.

In April, Canadian cannabis producer Phoena Group was granted creditor protection.

The company's list of unpaid creditors shows that it owes the Canadian government more than CA$2 million in unpaid fees and taxes.

In fact, the Canadian government was the company’s third-largest unpaid creditor, indicating that fees and taxes contribute a notable amount to cannabis businesses' costs.

At the time of its insolvency, Phoena had amassed a total debt with the Receiver General for Canada and the Canada Revenue Agency of CA$911,893 and CA$870,506, respectively.

The unpaid creditor list showed that Health Canada was owed CA$95,799.

Trichome Financial Corp. also owed the Canadian government millions of dollars in unpaid fees and taxes when it obtained creditor protection late last year.

The unpaid creditor list showed the Canada Revenue Agency was owed CA$7.7 million and Health Canada was owed approximately CA$443,000.

When The Flowr Corp., another cannabis company, filed for creditor protection, its second largest debt was to the Canadian government via the Receiver General for Canada (CA$781,994).

Health Canada was owed $1,886.

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.

In Canada's search to attract tech workers, are other migrant workers getting lost in the mix?

Social Sharing

• Facebook
• Twitter
• Email
• Reddit
• LinkedIn

Critics say move risks perpetuating a '2-tier' immigration system

Vanessa Balintec · CBC News · Posted: Jul 07, 2023 

A new initiative could help to bring in thousands of tech workers to fill labour shortages in Canada and spur innovation. But experts say Ottawa risks perpetuating an inequitable immigration system that gives more mobility and freedom to some workers over others, such as those in agriculture. (CBC)

Canada hopes to encourage more tech workers to visit and work in the country. But in its effort to do so, critics of the plan have concerns that the rights of other migrant workers will get lost in the process.

In an announcement last week, Immigration Minister Sean Fraser said the federal government is exploring a list of potential policies to encourage high-earning tech workers to tour the country and boost its tech sector, such as a renewed digital nomad scheme and dedicated open work permits.

While the initiative could help to bring in thousands of new workers to fill labour shortages and spur innovation, experts say the government risks perpetuating an inequitable immigration system that gives more mobility and freedom to some workers over others.

"If it's possible to create open work authorization for the tech industry to allow flexibility for labour mobility ... that same [principle] must be extended to all migrants," said Syed Hussan, executive director of advocacy group Migrant Workers Alliance for Change who's based in Toronto.

"Why is it that certain groups of people have more rights ... and others don't?"

• Canada's plan for more immigrants aims to boost workforce, but experts say they'll need support

• Expanding temporary foreign worker program just means 'more exploitable workers': advocate

Hussan and others who work in the field say open work permits and flexible work schemes given to tech workers should be made more available to all types of migrant workers — particularly those in industries experiencing their own shortages, such as agriculture, personal care and health care.

People in these industries — many from countries in the developing world who earn low wages — are typically given restricted visas that limit their stay in Canada based on their work with an employer, make it difficult to qualify for health-care coverage and restrict their ability to speak out against labour abuse over fear of losing their permits, he said.

Syed Hussan, executive director of Migrant Workers Alliance for Change, says open work permits and flexible work schemes given to tech workers should be made more available to all types of migrant workers — particularly those in agriculture, personal care and health care. (CBC)

"Canada needs to have the ability for workers in any different wage category to be able to come here with the same rights — and that's the fundamental issue," Hussan said.

According to Statistics Canada's latest data, the industries grappling with the highest job vacancy rates include agriculture, forestry, fishing and hunting; health care and social assistance; and accommodation and food services. Ottawa recently launched a separate temporary foreign worker program targeting immigrants working in these industries, among others.

Divide between richer and poorer workers

Canada started prioritizing more highly skilled tech workers sometime in the 1990s due to the internet boom, said Valerie Ann Preston, a professor in the faculty of environmental and urban change at York University in Toronto.

She said this marked the start of extended perks given to highly skilled workers on temporary permits, such as not being tied to single employers, allowing their spouses to work upon immigrating to Canada and providing easier access to permanent residency.

Highly skilled workers on temporary permits in Canada have been given extended perks, such as not being tied to single employers, allowing their spouses to work upon immigrating to Canada and providing easier access to permanent residency. (Roman Samborskyi/Shutterstock)

"What's interesting to me is that we maintained the privileged position of high-tech workers," Preston said.

Many of these tech workers disproportionately come from richer, more developed regions of the world, Preston said. They include North America, Europe, Australia, New Zealand, Japan and South Korea. Meanwhile, other migrant workers often given more limited working visas disproportionately come from Africa, the Caribbean, Central and South America, and parts of Asia.

• Canada wants to woo 'digital nomads.' Can we compete?

They're often highly skilled in industries from their home country but have a hard time transferring those skills to the Canadian market, which can be due to limitations in their work permits, so they end up making a "trade-off" by working in in-demand industries, Preston said.

"They may come with lots of skills and lots of experience, but they're going into jobs that don't offer pathways for career advancement ... they're going into jobs that are not well paid."

How to correct the '2-tier' system

John Shields, a professor in politics and public administration at Toronto Metropolitan University, said the government's move toward enticing tech workers fits with its broader plan of using immigration as a way to address labour shortages — spurred by an aging population and a skills gap across the board.

But Canada risks encoding inequity into immigration law if it continues to give more leeway to those at the "so-called top" of the labour market without adjusting its acceptance criteria for those in different but equally important industries, he said.

WATCH | Foreign workers trained for in-demand jobs working elsewhere: 

Some temporary foreign workers arriving in Newfoundland to work in fish plants are certified nurses and early childhood educators — which the province desperately needs more of. Memorial University economics professor Tony Fang talks about skill mismatch.

"There is a bit of a two-tier system here where for those lower-skilled jobs, you see a lot of the emphasis on the immigration program on temporary migration, where people actually have a hard time being able to qualify for permanence," Shields said.

"And yet ... those areas are often in very high demand, and they're not things that Canadian-born workers or immigrants who've been here for a longer period of time want to do."

When asked if the government would consider expanding open permits to other migrant workers, Immigration, Refugees and Citizenship Canada said while employer-specific work permits "protect" the Canadian labour market, it understands "the need for flexibility in this space."

• Canada to launch 'digital nomad strategy,' other measures to woo international talent

• In scathing report, auditor general says feds failed to protect foreign farm workers from the pandemic

"Which is why since 2019, we have allowed foreign nationals with an employer-specific work permit to apply for an open work permit if they are facing abuse or are at risk of abuse in their workplace," spokesperson Sofica Lukianenko said in an email statement, adding that people can also apply for new work permits and change employers quickly if they have another job offer.

But for Hussan, the government needs to shift toward an immigration system that gives all workers permanent residency upon arrival, forgoing a multiple-tiered system altogether. For Shields, increasing pathways to permanent residency for all workers is a start.

"We need to fill those gaps all through the labour market, and that includes in some of these other areas which actually should be also better recognized and more highly paid, too," Shields said.

 

Winnipeg’s Brady Landfill closed until further notice amid protests

By Sam Thompson  Global News

Posted July 7, 2023

View image in full screen

Cambria Harris speaks to media at a landfill blockade Thursday. Global News

The Brady Road Landfill is closed until further notice, the City of Winnipeg says.

Protesters showed up late Thursday afternoon, responding to the Manitoba government’s announcement that it won’t take the lead on the search of another local landfill for the remains of two Indigenous women.

Premier Heather Stefanson said in a statement Wednesday that searching the Prairie Green Landfill for the remains of Morgan Harris and Marcedes Myran, who are believed to have been killed last year, would be too risky, citing potential safety issues for workers. Stefanson repeated those concerns Thursday.

1:59Daughter of slain woman speaks out against Manitoba premier’s decision not to search landfill

The women’s families, along with Indigenous organizations and other advocates, have expressed disappointment and frustration with Stefanson’s decision.

The premier’s office says the province won’t stop a search if the federal government supports one, provided the feds can provide sufficient safeguards.

Police told 680 CJOB on Thursday that they had officers on-site at Brady Road to speak with protesters and ensure a peaceful outcome.

The city said contingency plans for garbage and recycling collection are in place. 

 

Okanagan Falls developer slapped with $200K in fines in multi-year sewage saga

SEWER SYSTEM OWNER FINED

Steffan Labbe / Glacier Media - Jul 8, 2023 / 9:00 am | Story: 435823

Photo: Vintage Views Development

A B.C. property developer has been handed nearly $200,000 in administrative penalties for failing to maintain a wastewater system that leaked human effluence into an orchard-turned-vineyard and a public road.

In a series of documents, the Ministry of Environment and Climate Change Strategy says Vintage Views director and owner Johnny Aantjes repeatedly failed to comply with provincial requirements to report on and maintain the wastewater system built for 120 homes in the Heritage Hills development near Okanagan Falls, B.C.

The wastewater system, which was originally designed to process triple the sewage, was scaled back when the development was transferred to Vintage Views Development Inc. in 2009. In 2012, Aantjes said he took over management of the 18-acre development overlooking Skaha Lake.

“It's kind of unfortunate it's got to this level without, you know, some sort of a remedy sooner,” Aantjes said. “We have a notice of appeal in.”

The latest penalties, handed to Aantjes in June, come after years of alleged violations of provincial regulations. Between 2013 and 2022, the ministry carried out nine inspections, issued four warnings and four administrative penalty referrals.

Penalties ramp up amid sewage leaks

In May 2019, the province issued a pollution abatement order after receiving reports effluence surfaced in an orchard near the residential development. That fall the ministry issued another order to contain the surfacing sewage, and repair and better monitor the wastewater system. But only a month later, staff from the Interior Health Authority reported effluence flowing on to a nearby public road.

Water samples taken from a domestic well 150 metres from the disposal field exceeded provincial and federal guidelines for nitrates and coliform, according to a ministry penalty assessment.

Further non-compliance triggered the province to prohibit Vintage Views from hooking up new units at the housing development. In response, the Regional District of Okanagan-Similkameen said it wouldn’t issue building permits until the order was cancelled. Barred from building their homes, an estimated 20 property owners reached out to local politicians to complain throughout 2021 and 2022, according to the province.

Then, in April 2022, the ministry issued three penalties totalling $19,300, that have since been paid.

The next month, local farmers installed a vineyard over the field where treated sewage was sent. Planting the vineyard led to the damage of several valve boxes, inspection ports and discharge pipes. More human effluence leaked to the surface, say government documents.

Aantjes acknowledged there was a failure in the effluent field that led to overflow. But he said the damage wouldn’t have happened if people were not pulling out an orchard and planting a vineyard over top of the wastewater system.

“I'm powerless to make the farmers and/or their lease operators remove these [vineyards]. But yes, some of the damage has come from them working their fields overtop of this effluent field,” he said.

Aantjes said he couldn’t speak to all of the allegations levelled against him by the province because staff manage the day-to-day operation of the wastewater facility. He said the details would be addressed in his appeal to the province.

Fecal coliform levels spike nearly 25,000 times provincial limit

Fecal coliform has traditionally been used as an indicator of fecal contamination, and a warning sign of the possible presence of disease-causing bacteria, viruses and protozoans. Often originating in the gut of warm-blooded animals, water contaminated with high concentrations of fecal coliform can spread harmful bacteria through the food chain, through crops eaten raw after being irrigated with polluted water.

Between August 2020 and May 2022, 16 effluent samples at the Heritage Hills development exceeded the provincial fecal coliform limit by an average of almost 5,000 per cent; in one case, fecal coliform levels spiked up to 24,700 times the provincial limit, representing a failure to meet “fundamental requirement of wastewater treatment,” the ministry said.

Over that time, the inspectors found Vintage Views had an 82 per cent failure rate when it came to monitoring fecal coliform, even though it had been warned of the requirement over the three previous years.

“The exceedances were significant,” wrote the ministry in a summary of the penalties. “All fecal coliform samples analyzed during the inspection period exceeded the limits. There is no indication that corrective measures were taken to correct the high fecal coliforms.”

Extra penalty for 'deliberate' contraventions

In one instance, the ministry bumped up the administrative penalty by $6,000 for the “deliberate nature of the contraventions despite being previously advised of them.”

“Failure to report surfacing of effluent, which must be assumed to contain pathogens, in an area frequented by people and accessible to wildlife, and in a location that may impact a domestic drinking water well, prevented the Ministry from taking action to prevent potential acute adverse effects,” the report notes.

Aantjes denied he or his staff had deliberately contravened any provincial regulation.

“There were definitely mistakes that were made by us,” he said. “We do not do anything deliberately to contravene with the safety that's out there. That does not happen.”

As the dispute between the developer and the province continues, 20 homeowners who are still waiting to build their homes at Heritage Hills have been left in limbo, unable to move in with their young families or comfortably retire.

Aantjes said he’s willing to work with the province to transfer the wastewater treatment system to public control but wants to be paid a fair market value — something on the order of $300,000.

“We're not ripping it out of the ground. It's not going anywhere,” said Aantjes of the sewage system, adding he's working at finding a solution with the province.