A tax payoff would be coming to New Zealand should they elect to join the mounting wave of countries legalizing recreational marijuana. Estimates suggest that there could be $70 million in taxes collected for the small country which is actually a downgrade from some of its earlier estimates.
A regulated market in cannabis would net $70 million in new tax revenue, independent analysis carried out for Stuff reveals.
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.
Stuff provided funding for the latest research as part of our series – ‘What if it was legal?’ – examining the implications of legalising cannabis in New Zealand.
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.
The Drug Foundation’s Ross Bell: ”The Government would make a hell of a lot of money.”
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.
Eric Crampton believes New Zealand could have a future in medicinal marijuana exports.
The NZIER research projects about 8.95m “tinnies” (1.5 gram parcels), worth $161m would be subject to the tax.
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