Taxing the UK Cannabis Market
A recent IDMU report commissioned by CLEAR (Cannabis Law Reform) has demonstrated that the net benefit to the taxpayer of a taxed and regulated cannabis market could range from £3.4 Billion to £9.5 Billion per annum, with a best estimate of £6.7 Billion per year at recent market levels.
The Cannabis Market
There are between 1.7 Million and 3.6 Million active cannabis users in the UK consuming between 620 and 1400 metric tonnes of cannabis each year with an estimated market value of between £2.9 and £8.6 Billion per annum. The best estimates are an average 2.7 Million active users consuming 1037 metric tonnes with an estimated street value of £5.9 Billion per annum.
The majority of the UK market is accounted for by cannabis domestically produced in the UK, with an estimate of between 167000 and 410000 UK growers producing between 390 and 950 metric tonnes of cannabis per annum. The bulk of production is accounted for by large scale commercial cultivations operating on a continuous basis, although significant quantities of skunk-type cannabis are imported into the UK from Western Europe.
Proposed Control Regime
A viable alternative control regime to the current prohibition policy could involve regulation and taxation of the cannabis market, involving;
• Excise duty based on the potency of the cannabis purchased – encouraging via pricing the consumption of lower-THC varieties of cannabis
• Domestic production licences allowing production for personal use within a specified surface area and/or limited wattage of horticultural lighting.
• Licensed Commercial production or importation and distribution including a network of bonded warehouses and licensed retailers, similar to but tighter than the existing control regimes for alcohol and tobacco.
Potential Tax & Duty Revenues
Based on estimated excise duty revenues at £1 per gram per 5% THC, VAT on recent total cannabis market values at 20%, licenses based on estimated numbers of growers taking 1 square metre to 2 square metre licences a £200 per square metre per annum and additional income tax revenues based on £200 per offender per annum (if records expunged), the revenue raised by licensing and taxing cannabis would range from £3.2 Billion to £9.2 Billion per annum, with an average of £6.4 Billion.
Cost Savings and New Costs
Estimated cost savings to the Criminal Justice System would fall between £293 Million and £646 Million per annum with an average of £512 Million. New costs of a compliance regime and collections are estimated at between £157 Million and £317 Million per annum, with an average of £214 Million.
Overall Cost Benefit
Overall the net benefit to the taxpayer of a taxed and regulated cannabis market could range from £3.4 Billion to £9.5 Billion per annum, with a best estimate of £6.7 Billion per year at recent market levels. Click Here to download the full report.