Could legalising cannabis raise $2 billion a year?


Greens Senator Richard Di Natale has referred to independent costings that show billions in potential income from legalising the drug

Greens leader Senator Di Natale has declared that legalising cannabis will raise almost $2 billion a year for treatment, education and the health system.

Senator Di Natale referenced costings, seen by AJP, that have been extrapolated by the Parliamentary Budget Office (PBO) based on the Greens’ proposal to legalise the production and sale of recreational cannabis in Australia.

This proposal includes the establishment of a new agency, the Australian Cannabis Agency, to oversee the regulation of recreational cannabis.

The agency would act as the sole wholesaler and would be responsible for issuing production licences to cultivators and sale licences to private retail outlets.

Parliamentary Budget Officer Jenny Wilkinson conducted the costing, finding that the proposal would be expected to increase the fiscal balance by $3.58 billion over the 2017-18 Budget forward estimates period, based on a variety of assumptions.

This amounts to about $2 billion per year, says Senator Di Natale, adding that this money could go towards treatment resources.

“Our plan to legalise cannabis will bring in billions of dollars, to fully fund drug education and treatment programs and provide a much-needed funding boost for our hospitals and Medicare,” says Senator Di Natale.

Sales of recreational cannabis under the proposal would attract the GST as well as an excise, whereas no tax is currently being paid on the income derived from illegal trading of cannabis.

The proposal would also be expected to result in a decrease in departmental expenses for the Australian Federal Police due to the reduced requirement for cannabis law enforcement, the PBO points out.

However the PBO says there is a “high level of uncertainty” regarding the costing as “there is limited information available to estimate the level of consumption of recreational cannabis or the market price”.

Assumptions for the costing were based on analysis of countries and states where legalisation of recreational cannabis has occurred.

The magnitude of annual sales of cannabis under the proposal was calculated by multiplying the expected number of cannabis users per year, by the estimated average amount consumed per year.

This amount was then forecast and projected to a two-year period with adjustments for behavioural responses.

Consumption of cannabis and associated arrests continue to rise, according to the Greens.

“The reality of this choice is that millions of Australians are forced to buy cannabis of unknown quality or strength from criminal drug dealers, or grow cannabis plants at home illegally,” says the political party in a statement.

“Creating a regulated legal market for cannabis … [would] allow for the current vast expenditure on the criminal response to cannabis to be redirected to drug treatment, education, and other harm reduction programs.”

However Federal Health Minister Greg Hunt has so far ruled out the proposal, saying that it is “dangerous and medically irresponsible”.

“Cannabis has very serious risks in relation to physical health, and in particular, to mental health,” Minister Hunt told reporters.

“That’s why it’s a highly regulated drug.”

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3 Comments

  1. PharmOwner
    24/04/2018

    There’s a lot of assumptions going into the costings. I wonder if they included estimates on the potential harms (and therefore health expenses) of increased uptake of cannabis use

    • D Carthew
      24/04/2018

      People are already using cannabis and we also have Medicare. I am not the treasurer but I feel confident that the taxes raised from sales would well and truly cover it. Education of the real dangers of cannabis and removing prohibitionist lies and taboos from it would result in lower usage in the longer term. Bearing in mind that up to 7 million have tried it already albeit illegaly. How many of the 7 million have had long term issues?

  2. Jarrod McMaugh
    26/04/2018

    Overall I think it’s a good argument; one that should be considered as a real option, even if the specifics of this proposal don’t end up being the format that is adopted.

    A few comments on specific pieces of this article:

    **However the PBO says there is a “high level of uncertainty” regarding the costing as “there is limited information available to estimate the level of consumption of recreational cannabis or the market price”.**
    Whatever the information available is, I’d feel very confident that consumption levels have been underestimated.

    **“The reality of this choice is that millions of Australians are forced to buy cannabis of unknown quality or strength from criminal drug dealers, or grow cannabis plants at home illegally,” says the political party in a statement.**
    One of the tenets of cannabis legalisation would be the decriminalisation of home-growing, and the decriminalisation of selling cannabis. If the legal status of cannabis was changed, these activities would cease to be illegal, and we wouldn’t have “criminal drug dealers”……. except that this proposal is for a single agency to exist who licenses sellers and growers. I wonder how many people who currently have an income reliant on selling cannabis will be eligible to be licensed by this Agency?

    I have a clients (not a small number of them) who’s income is primarily derived from cannabis sales. Legalisation would make their life a lot safer (less robberies/standover/extortion etc). They would need some coaching on how to do red tape (BAS, bookkeeping, new forms from this Agency etc) but would otherwise benefit significantly from being able to legitimise their income. If this new agency proposal leads to a situation where the majority of those who subsist off of cannabis sales are excluded, then we’re just marginalising these people more.

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