Thank you, Mr. Chair.

I'm the director general of the sales and excise tax division at the Department of Finance. I'm going to talk briefly about clauses 81 to 86. These propose to implement the new THC-based duty rate on certain cannabis products. This proposal builds on the current excise duty regime that came into effect when cannabis for non-medical purposes became legal in October of last year.

Currently, the legal classes of cannabis products permitted for sale are fresh and dried cannabis, cannabis oils, seeds and seedlings. However, new classes of products namely edibles, extracts and cannabis topicals will be permitted for legal sale later this year under the Cannabis Act. The government is proposing that the excise duty framework for cannabis products be amended to more effectively apply the excise duty to these new classes of products as well as to cannabis oils, which are already legally for sale.

In particular, part 3 implements amendments so these products are subject to excise tax based on the total quantity of tetrahydrocannabinol, THC, which is the primary psychoactive component of cannabis. The introduction of this new THC-based rate has been informed by the feedback that we received at the department from the CRA and from the cannabis industry.

The current excise duty framework for cannabis products imposes the higher of one of two rates. One, either a flat duty rate based on the total weight of cannabis plant inputs to a product, or two, an ad valorem duty based on the producer's price. However, cannabis producers have expressed some concerns regarding the potentially complex calculation of excise duties on oils when basing them on the quantity of cannabis material inputs.

Having one flat rate based on total THC content for certain cannabis products would simplify compliance. It would allow these producers, as well as the CRA and other administrators, to more easily calculate and verify excise duties for cannabis edibles, extracts and topicals.

At the same time, this proposal better aligns the excise duty regime with recommendations from the health care community because it bases the duty on the intoxicating component of cannabis that is THC. In that respect, it's similar to how excise duty is applied to alcohol products like spirits. This measure would come into force on May 1, 2019.

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