Cannabis could raise $490 million in taxes per year, but careful design and implementation are needed to avoid unintended consequences

30 April 2020

Media release
New Zealand Institute of Economic Research (Inc)
Media Release, 30 April 2020

For immediate release

Cannabis could raise $490 million in taxes per year, but careful design and implementation are needed to avoid unintended consequences, NZIER find in a new report out today.

Kiwis will be asked Do you support the proposed Cannabis Legalisation and Control Bill? in a non-binding referendum on 19 September 2020.

A new tax on cannabis, on top of GST, is proposed as part of the package. NZIER estimates that this could raise up to $490 million a year.

“To achieve the full $490 million per year in tax revenue, our modelling assumes that legal cannabis will need to displace the illegal market entirely” said Peter Wilson.

“It may take some time to achieve that, but if legal cannabis is safe and the price is reasonable, findings from countries who have legalised cannabis tell us that people will make the switch.”

“The Bill’s requirement to reduce cannabis use over time could decrease the amount of tax revenue the Government will earn from cannabis.”

“Overseas lessons show the detail of the legislation is important to avoid unintended consequences and achieve the Government’s overall objectives of reducing use through time” said Peter Wilson.

“If regulatory costs and taxes are too high an illegal market will likely re-emerge and gain market share.”

For further information please contact:
Peter Wilson
Principal Economist
(021) 870928
peter.wilson@nzier.org.nz

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