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Cannabis legalization could generate nearly $ 1 billion in government revenue, but cause a short-term spike in use, according to two new reports.
The BERL economic think tank published its research on what a legal market for cannabis would look like on Tuesday. Justice Minister Andrew Little warned that the reports should be taken with “a grain of salt.”
The reports, commissioned by the Justice Ministry, were initially withheld as the ministry intended to make them public after the next referendum. But the ministry backed down after a media outlet filed a complaint with the Ombudsman.
New Zealanders will vote on whether recreational cannabis use should be legalized in the October general election. The Government has produced a bill that would enter Parliament if the “Yes” vote is successful.
DOMINICO ZAPATA / STUFF / Waikato Times
New Zealanders are asked to vote on the prospect of a legalized market for recreational cannabis. (file photo)
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The bill would allow the consumption, sale and purchase of cannabis for recreational use, by people 20 years of age or older, but did not stipulate the amount of tax the government would collect on sales.
BERL, based on the evidence of the current domestic and illicit cannabis market and legalized markets abroad, proposed limiting cannabis production to 120 tons per year, which would be allocated through a quota system, as is done with fishing .
About 100 tons of the quota would be destined to commercial operators and social groups, which comply with the intentions of “social equity” of the law, and the remaining 20 tons would be non-commercial, homegrown or “micro-growers”.
Little said such a quota system would amount to an “auction system” that would drive the price up as people try to make a profit, something a future Labor government would want to avoid.
Any report is helpful in shedding light on issues and promoting a bit of discussion, but there are some things in your report that you wouldn’t do if you had more features in it.
BERL said managing the licensing scheme could cost $ 30 million. A “harm reduction rate”, used to fund educational programs and intervention services, could generate $ 440 million each year if the rate were set at the proposed $ 4 per gram of cannabis.
About 5,000 full-time jobs would be created, paying wages and salaries of $ 210 million each year. The market would contribute $ 440 million to the country’s GDP and the income tax collection would amount to $ 30 million.
SIMON O’CONNOR / STUFF / Stuff
Justice Minister Andrew Little has said that two BERL reports on the cannabis market should be taken with “a grain of salt.” (file photo)
Total government tax collection could also include $ 646 million in excise duties, $ 181 million in GST, and $ 56 million in license fees.
BERL calculated the profit margin on a $ 20 gram of cannabis as 0.90 cents from the retailer and $ 1 for the grower, after deducting taxes and costs such as processing.
A sufficient retail market would require 207 retail businesses in the six major cities and towns, and another 94 for smaller towns and 119 retailers for rural municipalities, BERL estimated.
Little said he “wouldn’t assume” that so many retailers would be allowed to open in high-density areas.
BERL also calculated the social impact of cannabis legalization, saying it could cause an increase in use in three to five years, with nearly 140,000 more people using the drug.
There would be a short-term impact of 300 more hospitalizations each year, at a cost of $ 4 million, and 940 fewer convictions among other reductions in enforcement actions, saving $ 10.7 million.
Little said the report had to be “taken with a grain of salt, it is an economist’s view on the legalization of cannabis,” while the government had taken into account the opinions of other experts, in fields such as justice and law. health, when preparing the legalization bill.
