Cannabis facilities put on Alberta’s tax radar

Production operations were treated as agriculture buildings with a zero tax rate, but heavier municipal taxes now allowed

The Alberta government plans to allow municipalities to hike taxes on cannabis industrial operations, a move that would allow counties to generate more revenue.

Municipal Affairs Minister Kaycee Madu announced the changes at the Rural Municipalities of Alberta convention Nov. 13 in Edmonton, saying it was done in response to concerns from county leaders.

“It is important that cannabis production facilities, which are heavy users of municipal services, pay their share for those services,” Madu said.

The change means cannabis industrial facilities will no longer be taxed the same as agricultural buildings.

Agriculture buildings in Alberta are taxed at zero percent in rural municipalities and 20 percent of the going rate in urban municipalities. Land, however, is taxed at a regulated rate based on the cost of production.

It will take effect in 2020 and won’t affect greenhouse operators or industrial hemp cultivation.

The RMA welcomed the changes, saying rural municipalities have been asking the government to put cannabis production facilities on equal footing with other industrial businesses since it was legalized.

“I’m glad the government listened to our concerns and acted swiftly,” said president Al Kemmere.

“They have a facility they are operating that puts a stress on municipalities. We don’t want to take those financial stresses and put them on other businesses and leave the cannabis people out of that.”

Cannabis production facilities operate in approximately 25 municipalities in the province, Kemmere said.

It’s not yet known what taxes the facilities will incur or how much revenue will be generated by municipalities, but Kemmere said those figures will become available later this year or next year.

Cannabis producers had previously argued that the plant is simply another crop and that the industry has brought significant investment to Alberta.

They weren’t happy with the new changes but not entirely surprised.

Aurora Cannabis, which has two Alberta growing facilities, said in a statement it was disappointed with the tax changes.

It said the company has created more than 2,000 jobs and invested more than $500 million in Alberta.

There are concerns that hiking cannabis companies’ taxes could deter investment, but Madu said he believes that won’t happen.

“All we are asking them to do is pay the same amount of taxes that other businesses are paying. We have not imposed any undo burden on them,” Madu said.

“If mom-and-pop shops out there can pay their own taxes, there is no justification … that (cannabis production facilities) should not pay their own fair share.”

Joe Ceci, the NDP’s municipal affairs critic, said the change is good for municipalities with cannabis operations because it will provide more revenue.

However, he said other measures introduced by the United Conservative Party government will hurt communities.

He said the nine percent cut in funding, dismantling the elite wildfire firefighting unit and new measures to potentially make small municipalities pay for policing are going to hurt them.

“The government is putting a few things in the window, but they are taking away so much more that they don’t want people to take a look at,” he said.

“I think there is going to be a significant cost to municipal districts and counties.”

Kemmere said nobody wants cuts, but municipalities, for the most part, will be able to handle the burden in the short term.

However, he added, municipalities are going to have to make hard decisions on capital projects and operating spending. It’s possible some municipalities will have to raise taxes.

“We’re willing to work with the province, but we don’t want to do more than our share,” he said.

Kemmere said municipalities want guarantees that there will be a new funding formula that will tie 100 percent of funding to the province’s economic performance.

“We’re willing to be linked so closely, that we will take the ride down if that happens,” he said.

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