Study On Legal Cannabis: Treasury Could Take 2.4 Billion Euros

Study On Legal Cannabis: Treasury Could Take 2.4 Billion Euros Canada allows cannabis smoking, just as nine US states...they legalized cannabis. What would such a legalization mean to the German state coffers? A study of the hemp association promises a billion plus. 2.39 billion euros annually. That's how much the treasury could collect and save by legalizing cannabis per year, bottom line.

To this result a study comes for the German hemp federation (DHV), which would like to convince gladly the policy of the advantages of a legalization. The association has therefore asked a team of authors to calculate the consequences for the state coffers by Haucap.

Mr. Justus Haucap is a professor at the University of Düsseldorf and was previously Chairman of the Monopolies Commission. Just under 2.39 billion euros, how can this sum be generated? It is composed of tax revenues and cost savings, see the table below. In concrete terms, this means that the prevention, prosecution and sanctioning of cannabis offences requires the police, public prosecutors and courts to spend money every year on so-called repressive costs. They will fall away as calculated below.

Tax revenues and costs saved by legalizing by cannabis

Tax type Revenues Collected in Euro
Cannabis tax 650,000,000
Value added tax 403,750,000
Trade tax 25,673,390
Corporate income tax 87,391,500
Wage tax 145,182,755
Police costs saved 1,077,070,230
Justice(courts,public prosecutor's offices,prison): Not calculation

Over all total of 2,389,067,875
It is not easy to calculate the size of such items in the future, because often hardly any reliable data are already available for the present. Here, Haucap and his staff calculated the share of expenditure on cannabis trials in the total police investigation costs. In 2016, 3,790,506 cases were solved in Germany, 171,302 of which were cannabis offences or 4.5 percent.

If one now assumes that this also corresponds to the share of the total police costs of 23.833 billion euros, the police spend 1. 077 billion euros annually on the clarification of cannabis offences. The value should only be understood as a justified estimate, because of course not all types of police investigation work are equally expensive. It certainly costs more to solve a murder than to dig up an illegal marijuana farm.

On the other hand, cases that have not been clarified are not even taken into account here. The police budget does not take into account court costs or the number of orders for punishment issued by public prosecutors. So one would actually have to add the costs for unsuccessful investigation work, for the public prosecutor's office, courts and prison in order to quantify the total law enforcement. The only thing missing is reliable data.

Weed smoking for the treasury
The second major economic argument for a cannabis release is that it holds a quote of huge clear potential for tax revenue. Of course, there are no official figures on legal use as long as cannabis is illegal. And it is hard to predict how consumption will develop during legalization. Here the authors have helped themselves with per capita needs in Colorado, where cannabis is legal, as well as known data on user behavior in Germany. On this basis, a possible consumption in Germany was calculated, namely a total annual requirement of 250 tonnes. This is the lower end of the estimates, they range from 200 to 600 tons. In order to determine the price level, Haucap has oriented itself to the black market, it provides a good indication of the price that will ultimately be charged in the retail trade. The majority of the prices there are between 9 and 12 Euro per gram, it was calculated with rounded 10 Euro.

Now it was assumed that the state would levy a cannabis tax. It would probably resemble alcohol or tobacco duty. It could then be 2. 60 euro per gram if retailers offer cannabis at a gross price of 10 euro. Gross price, because sales tax of 19 percent would also be paid, in which the state also earns. With a total requirement of 250 tons, a cannabis tax could thus flush 650 million euros into the state coffers, the turnover tax an additional 404 million euros.

Monetary cloud also for the social funds
It's not just that. Every state-regulated retail chain generates trade and corporate taxes, even if the flourishing black market becomes a legal branch of industry. For these estimates, Haucap has looked at industries that he considers to be quote sufficiently comparable to the cannabis market, the tobacco market is one of them. Thus it comes to a trade and corporate income of more than 113 million euros.

Francis Tawiah (Duisburg - Germany)