Cannabis could contribute $490m a year in taxes

Legalisation of cannabis will be put to the vote in a non-binding referendum in September. File image/SunLive.

The government's coffers could be winners if cannabis is legalised.

Work by the NZ Institute of Economic Research (NZIER) shows a legal cannabis industry could raise about $490 million per year in tax, including GST.

Legalisation of the drug will be put to the vote in a non-binding referendum in September.

A tax on a legal cannabis industry has been calculated at 25 per cent.

NZIER principal economist Peter Wilson says the projected tax-take on cannabis was only an estimate.

There was not a lot of information in New Zealand about cannabis use.

Peter says NZIER used more detailed information from Canada and Colorado, which provided detail on just how many people actually consumed cannabis.

''The key insight from that is that heavy users do actually consume a lot of this product and we assumed that our use and distribution is the same as Colorado and scale that for population and said that if that is the case then how much would be sell in a legal market and we came up with the round number of 1100 tonnes.''

''To achieve the full $490m per year in tax revenue, our modelling assumes that legal cannabis will need to displace the illegal market entirely.''

He says the experience from Colorado and Canada was that a legal market could drive out the illegal market if it was well regulated and provided a quality product that consumers wanted to pay for.

''It may take some time to achieve that, but if legal cannabis is safe and the price reasonable, findings from countries which have legalised cannabis tell us that people will make the switch.''

Peter says the predicted tax take was a material sum for the government.

He says if regulatory costs and taxes were too high an illegal market would likely re-emerge and gain market share.

Peter says because the Cannabis Legalisation and Control Bill had a requirement in it to reduce cannabis use over time, this could decrease the amount of tax revenue the government could earn from cannabis.

''Overseas lessons show the detail of the legislation is important to avoid unintended consequences and achieve the government's overall objective of reducing use through time.''


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@ Justin T

Posted on 28-05-2020 19:48 | By Yadick

Well said.


Posted on 27-05-2020 10:34 | By Justin T.

It won’t drive out the illegal trade but it will increase the number of mental faculty numbies on our roads and/or creating danger in the workplace not to mention society decline. Dope by name Dope by nature. Justin T.

Really Jacinda

Posted on 27-05-2020 10:33 | By GWHtpt

What a joke, all the greens have put energy towards is smoking pot and hanging out at protests. This government needs to start doing something or we are all going to be on the dole soon. Could haha no guarantee there and then there’s all the negatives that we will have to pay for. Hope you like her cheap slogans, smile and crocodile tears because that’s all she’s delivered!!!


Posted on 27-05-2020 09:23 | By dumbkof2

on the one hand they want to ban smoking then on the other they want to make smoking drugs legal


Posted on 27-05-2020 07:13 | By The Professor

How much will the tax payer have to fork out to cover medical costa through an increase in Road traffic and workplace accidents when people are high on cannabis? And the cost of life when some drug user takes out an innocent driver or car load of people?


Posted on 26-05-2020 22:34 | By Yadick

Lowering our standards to pay taxes. What an absolute disgrace. SHAME ON YOU LABOUR. Up goes medical but I’m sure some taxes will cover that.

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