Thursday, November 01, 2007

Taxing Cannabis

Due to the reduction in house sales there is a one billion deficit in the Irish budget. In order to make up this deficit the finance minister needs either to cut spending or raise taxes. I want to examine the effect of allowing cannabis to be sold and taxed by the government on this deficit.

The amount of cannabis usage can be estimated from the amount of seizures "Cannabis resin valued at €48.7m was seized". Between 10% and 5% of all drugs are seized according to internationally agreed figures. So this means that the current cannabis market in Ireland is worth conservatively around 500 million Euro.

This 500 million could make how much tax for the exchequer?
Profits on cannabis is unlikely to be as high as the 400 times mark up on heroin.
This can be evidenced by the lack of cannabis dealers shooting each other. Still as this is an illegal drug it is reasonable to assume the costs of the actual product are minimal.

So if the legal seller of cannabis took half the cost to create and distribute the product and the exchequer took the other half in tax (this is a conservative estimate of the possible tax take) then at a minimum 250 million Euros in tax could be gathered each year from current levels of cannabis usage.

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