Tax on cannabis?

Stuff reports:

A regulated market in cannabis would net $70 million in new tax revenue, independent analysis carried out for Stuffreveals.

The New Zealand Institute of Economic Research modelling shows a 25 per cent excise tax on legal marijuana would raise $40m, on top of an extra $30m from GST.

The figures are well short of an earlier estimate by Treasury which put the potential tax take at $150m per year.

$70 million is still a useful sum of money.

Despite the dramatically lower revenue estimate, NZIER principal economist Peter Wilson said he still felt the drug should be legalised.

“Prohibition has been an expensive failure. It has allowed illegal groups to charge higher prices and there is no evidence that it has changed consumption,” Wilson said.

When half of adult NZers say they have tried it, you know a different approach is needed.

A legal market in cannabis would drive the consumer price down and significantly cut the cost of producing the crop, NZIER believes.

Wilson suggested a 25 per cent excise on cannabis, based on the experience in Colorado, USA. After the drug was legalised in Colorado, the black market for cannabis shrunk dramatically as users put a premium on being able to buy a product of uniform standard, that had been subject to quality checks and was legal.

“One feature that has been very popular with users is the requirement in Colorado for the strength of marijuana to be independently tested and displayed on package,” Wilson said.

So the market becomes more about quality than price.

Proponents also believe a tax on cannabis could mitigate some of the harm it causes.

The “drug harm index” puts the wider cost to society from cannabis-related crime, loss of wealth and police interventions at $1.28b. While some of those costs would disappear if cannabis sales were no longer a crime, the health costs would remain.

The tax windfall from cannabis could go back into health measures, according to Drug Foundation executive director Ross Bell.

“There are 50,000 people who need help for their alcohol and drug problems any given year who cannot get that help,” Bell said.

He favours an initially tough legalisation regime, treating cannabis similarly to heavily taxed tobacco or alcohol.

“You can say, there’s no advertising and we’re only going to let you buy it online only, there won’t be any stores and the age restriction is going to be 20 and the tax is going to be really high.”

Sounds reasonable.