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Canadian government among top unpaid creditors of failed cannabis businesses

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Canada’s federal government accounts for a growing share of the unpaid debts racked up by failed cannabis companies, lending credence to claims the nation’s nascent adult-use industry is suffering from pricey fees and heavy taxation.

A review of recent insolvency filings by MJBizDaily found that the Canada Revenue Agency, the federal tax collection body, and Health Canada, the national department in charge of regulating cannabis production, are commonly among the biggest unpaid creditors for insolvent marijuana producers.

In the 2021-22 fiscal year, various levels of government collected more than 1.5 billion Canadian dollars ($1.2 billion) from the cannabis industry via excise tax, other taxes (such as sales taxes) and various fees, including the annual regulatory fee.

However, the amount of unpaid federal excise tax and fees has skyrocketed.

Licensed producers owed the Canada Revenue Agency (CRA) CA$192.7 million as of March 31, 2023, while unpaid regulatory fees jumped to almost CA$4 million.

“It’s increasingly clear that, for many cannabis companies, insolvency is the result of a formula where taxes and fees squeeze out such a big proportion of the overall price,” George Smitherman, CEO of the industry group Cannabis Council of Canada, told MJBizDaily.

Fierce competition, a glut of product and falling wholesale prices are also weighing on the industry.

The latest example of outstanding debts owed to the federal government is Vancouver, British Columbia-based cannabis producer Tantalus Labs.

In June, Tantalus filed a Notice of Intent for Restructuring in a British Columbia court.

A review of Tantalus Labs’ creditors list shows that the Canadian government accounts for more than half the licensed producer’s unsecured debts.

Of the CA$8.4 million that Tantalus owed to 92 creditors, CA$4.5 million was due to the Receiver General for Canada, the body responsible for accepting payments owed to the federal government.

The producer also owed Health Canada CA$388,490.

Together, the two government bodies make up 58% of Tantalus’ debt, an indication that fees and taxes contribute a significant amount to cannabis businesses’ costs.

It’s a similar story for other recent insolvent producers.

Last month, Concord, Ontario-based cannabis company Aleafia Health entered creditor protection after the failure of its attempt to merge with U.S. multistate marijuana operator Red White & Bloom Brands.

The company had racked up unsecured obligations totaling CA$29.7 million.

The Canadian government was by far the biggest unpaid creditor, being owed CA$15.8 million, or well more than half the company’s outstanding debt. Most of that was owed to the CRA.

When cannabis producer Phoena Group was granted creditor protection earlier this year, the Canadian government was shown to be the company’s third-largest unpaid creditor.

Vaughan, Ontario-based Phoena – formerly called CannTrust – had amassed a debt owed to the government totaling CA$1.8 million. The money was owed to the Receiver General for Canada, the CRA and Health Canada.

Why so much debt?

Michael Armstrong, an associate business professor at Brock University in St. Catharines, Ontario, said one explanation for the increase in debts owed to the government is that businesses can get away with it.

“If you are running a cannabis company and you realize you don’t have enough money to pay all your debts,” he said, “then you’re going to ask, ‘Who can we put off?’

“It seems that companies are realizing they can procrastinate on the excise taxes and other government fees.”

Armstrong suggested the growing proportion of debt owed to the federal government partly reflects high taxes and fees charged specifically to cannabis businesses.

If the industry were already firmly established, the taxes and fees wouldn’t necessarily be higher than they should be.

But he said they might be too much for businesses to bear given the current state and maturity of the industry.

October will mark the fifth anniversary of Canada’s adult-use cannabis industry.

“It’s a brand-new industry that’s still trying to figure out how many stores (and cultivators) we need to compete against each other and against the (illicit) market,” he said.

Armstrong noted that prices have come down substantially in the regulated market, where significant margin has been taken off the table since 2018, when the cannabis excise tax was rolled out. 

“So the margins they’re taking the mostly fixed taxes and fees out of doesn’t leave much for the industry, whereas back in 2018 the margin was much bigger,” he said.

“Someday, perhaps in the future when the margins aren’t so pressed, maybe those tax takes will turn out to be appropriate.”

‘Unleash the hounds’

The number of licensed cannabis producers unable or unwilling to pay their excise duty to the Canadian government has soared in recent years.

Almost three-quarters of the 305 LPs required to pay the duty had an outstanding debt with the CRA as of March 2023.

The number of LPs with outstanding excise debt was:

  • 12 in 2019.
  • 33 in 2020.
  • 68 in 2021.
  • 141 in 2022.
  • 213 in 2023.

Facing a tidal wave of delinquent payees, the CRA earlier this year began stepping up pressure on cannabis producers with outstanding excise payments.

The pressure included “legal warning” letters.

Smitherman, of the Cannabis Council of Canada, suggested the government ought to adapt its excise tax to the reality facing the industry.

“The government’s response to the growing evidence of unpaid taxes and fees has been to unleash the CRA hounds rather than pay any concern to the formula that caused a lot of the problem in the first place,” he said.

Focus on fees

Not all cannabis executives believe the excise tax applied to sales is unreasonable.

Norton Singhavon, CEO of Kelowna, British Columbia-based Avant Brands, said the excise is fine and the industry should instead be targeting various fees levied by Health Canada, such as the annual regulatory fee.

“All the fees Health Canada scrapes along the way are where the (potential) savings are for businesses,” Singhavon said in a phone interview.

Singhavon doesn’t believe the excise tax is the cause for so many business failures.

“I think most of these companies have bigger problems,” he said.

“For the vast majority, (the excise tax) doesn’t change their financial situation.

Singhavon noted that some cannabis companies are succeeding in the face of high fees and taxes.

He noted the third-quarter results of Cannara Biotech, a Montreal-headquartered cannabis producer, which reported positive free cash flow and net income for its third quarter.

He also said his company, Avant Brands, reported positive free cash flow and a small loss for the recent quarter.

“It’s still an early stage industry. It’s meant to be challenging,” Singhavon said.

“It’s meant to be hard. It’s not a gimme.”

Source: https://mjbizdaily.com/canadian-government-among-top-unpaid-creditors-of-failed-cannabis-businesses/

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Jio’s 1,600-Satellite LEO Constellation Gets Technical Green Light

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Reliance Jio has crossed a significant milestone in its space connectivity ambitions after its proposal to deploy a Low Earth Orbit (LEO) satellite constellation of around 1,600 satellites received a positive technical assessment from the Indian National Space Promotion and Authorisation Centre (IN-SPACe).

The evaluation, conducted jointly by IN-SPACe, the Indian Space Research Organisation (ISRO), and the Wireless Planning and Coordination (WPC) wing of the Department of Telecommunications, reportedly concluded that Jio’s proposed system meets the required technical standards and is comparable to leading global satellite broadband networks.

India’s Indigenous LEO Satellite Vision

Under the proposal, Reliance Jio plans to deploy between 1,600 and 1,650 satellites in Low Earth Orbit at an altitude of around 650 kilometres.

The planned constellation is expected to provide high-speed satellite connectivity across India, with approximately 32 satellites visible from any location at a given time. The company aims to roll out the network within the next two to three years, subject to regulatory approvals.

According to industry estimates, the satellite system could deliver 4.5 to 5 terabits per second (Tbps) of total data capacity, making it one of the largest satellite broadband projects proposed in India.

The project is expected to require an investment of $10–15 billion (approximately ₹95,000 crore to ₹1.42 lakh crore), reflecting the scale of infrastructure needed for satellite manufacturing, launches, ground stations, and user terminals.

Regulatory Process Moves Forward

Following the successful technical review, the proposal is expected to move into the next phase of regulatory approvals.

The government may now assist Jio in securing orbital slots, coordinating spectrum usage, and filing applications with the International Telecommunication Union (ITU), the global body responsible for managing satellite orbit and frequency allocations.

Obtaining orbital rights remains a critical step, as Low Earth Orbit has become increasingly competitive due to the growing number of satellite broadband projects being planned worldwide.

Officials also indicated that the proposed satellite architecture has been designed to coexist with future Indian LEO constellations, allowing multiple domestic operators to share orbital resources efficiently.

Broadband, Mobile Connectivity, and Strategic Applications

Jio plans to use the satellite network to provide a range of communication services, including satellite broadband, mobile backhaul, enterprise connectivity, and direct-to-device (D2D) satellite communication, particularly in remote and underserved regions where conventional telecom infrastructure is limited.

The company also intends to establish 20 to 22 ground stations across India to support network operations.

Apart from commercial telecommunications, officials have highlighted the project’s potential strategic importance. A domestically developed satellite constellation could strengthen India’s communication infrastructure, reduce dependence on foreign satellite operators, and support national security requirements.

Reports suggest preliminary discussions are underway regarding the possibility of integrating defence-related payloads into some satellites, enabling both civilian and strategic use.

Major Step for India’s Space and Telecom Sectors

Industry analysts view the technical clearance as an important milestone in India’s expanding private space ecosystem. If Jio secures the remaining regulatory approvals and international orbital clearances, the project could become the country’s first large-scale indigenous LEO satellite broadband network.

The initiative also aligns with India’s broader efforts to expand digital connectivity while strengthening its presence in the global satellite communications market.

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Alleged Crores Pharma Scam Mastermind Arrested from Surat

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After evading law enforcement for nearly 13 years, an accused linked to a large-scale pharmaceutical fraud case has been arrested by Delhi Police from Surat, Gujarat. The suspect is alleged to have orchestrated a series of financial scams involving fake identities, forged documents, and dishonoured cheques used to procure high-value pharmaceutical raw materials.

Authorities say the accused, identified as Himmat Singh Lodha, is believed to have defrauded multiple pharmaceutical companies in Delhi of goods worth approximately ₹98 lakh before disappearing and remaining underground for years.

Fake Business Deals and Dishonoured Cheques Used in Fraud

Investigators claim the accused posed as a legitimate pharmaceutical trader and placed bulk orders for expensive drug ingredients, offering post-dated cheques as payment security.

In one documented case from 2013, he allegedly obtained around 550 kilograms of Gliclazide, a diabetes-related pharmaceutical ingredient, valued at over ₹26 lakh. When suppliers attempted to encash the cheques, they were reportedly returned with the remark “account closed.”

Following the transaction, the accused allegedly vacated his office and rented residence and disappeared without settling payments. He was later declared a proclaimed offender in 2016 after repeatedly failing to appear before court proceedings. Authorities had also issued a reward for information leading to his arrest.

Multiple Identities and Repeated Fraud Pattern

Police investigations further link the accused to another cheating case dating back to 2012, where he allegedly used a fake identity, “Kailash Jain,” to obtain a large consignment of Ambroxol HCL, a pharmaceutical compound used in cough medications. The value of that consignment was estimated at around ₹72 lakh.

Officials believe the accused followed a consistent modus operandi—posing as a credible businessman, securing high-value goods on deferred payment terms, and then disappearing after delivery while shutting down business operations.

Investigators suspect that forged business records, fake company credentials, and fabricated financial histories were used to build trust with suppliers and gain access to expensive raw materials.

Multi-State Surveillance Leads to Arrest in Surat

A special Crime Branch team tracked the accused through coordinated surveillance efforts across multiple cities, including Mumbai, Ahmedabad, and Surat. After nearly a month of technical monitoring and intelligence gathering, officials located and arrested him from a residential area in Surat.

Authorities also revealed that the accused had been involved in property-related activities while staying under the radar to avoid detection.

Growing Threat of Corporate Identity Fraud

The case highlights a rising trend of organised financial fraud targeting industries that rely heavily on trust-based transactions and deferred payments. Experts note that criminals increasingly exploit gaps in corporate verification systems by using fake GST registrations, temporary offices, and forged documentation to appear legitimate.

Cybercrime and financial fraud specialists warn that such schemes are becoming more complex with the widespread availability of digital business tools, making it easier to create convincing but fraudulent corporate identities.

Experts Urge Stronger Due Diligence in High-Value Transactions

Experts, including former IPS officer and cybercrime specialist Prof. Triveni Singh, emphasize the need for stricter verification procedures in commercial dealings. He noted that relying solely on paperwork or digital business profiles can expose companies to significant financial risk.

Authorities and industry experts recommend physical verification of business operations, bank account validation, and detailed background checks before engaging in high-value or deferred-payment transactions—particularly in sectors like pharmaceuticals, where single consignments can involve transactions worth crores.

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EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

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A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

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