Study on legal cannabis: Treasury could take 2.4 billion euros

2.39 billion euros - annually. So much could the Treasury take and reduce by legalizing cannabis per year, all in all.

This is the conclusion of a study for the German Hemp Association (DHV), which would like to convince the policy of the benefits of legalization. Therefore, the association has asked a team of authors around Justus Haucap, to calculate the consequences for the state coffers. Haucap is a professor at the University of Dusseldorf and was formerly Chairman of the Monopolies Commission.

Almost 2.39 billion euros - how does this amount come about? It consists of tax revenues and cost savings - see the table below. Savings, that is to say concretely: For the prevention, prosecution and sanctioning of cannabis offenses, the police, the public prosecutor's offices and the courts must spend money each year, so-called repression costs. They fall off then.

Tax revenue and saved costs through legalization of cannabis

Source: DICE Consult GmbH on behalf of the German Hemp Association

Calculating the size of such items in the future is not easy, because often there is little reliable data for the present. Here, Haucap and his associates calculated the share of cannabis expenditure spent on the totality of the police investigation costs. In 2016, 3,790,506 cases were clarified in Germany, of which 171,302 were cannabis offenses - that is 4.5 percent.

Assuming that this also corresponds to the share of the total police costs of 23.833 billion euros, the police spend annually 1.077 billion euros for the investigation of cannabis offenses.

The value should be understood only as a reasonable estimate, because of course, not all types of police investigation work are equally expensive: it usually costs more certainly to clarify a murder than to dig an illegal marijuana.

On the other hand, unexplained cases are not considered here. The police budget does not take into account court costs or the number of prosecution orders. So you would actually add the cost of unsuccessful investigative work, prosecution, courts and correction to quantify the entire law enforcement. Only lack reliable data for it.

Kiffen for the treasury

The second major economic argument for cannabis release is that it "has a clear potential for tax revenue." Of course, there are no official figures on legal consumption as long as cannabis is illegal. And how the consumption develops in a legalization, it is hardly predictable, as the case has shown Canada.

Here, the authors have come up with the per capita demand in Colorado, where cannabis is legal, as well as well-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. That's the bottom end of the estimates - they range from 200 to 600 tons.

To determine the price level, Haucap has focused on the black market - it provides a good indication of the price, which should ultimately be collected in retail. The majority of the prices is between 9 and 12 euros per gram, it was calculated with rounded 10 euros.

Now it was assumed that the state would levy a cannabis tax. It would probably be similar to the alcohol or tobacco tax. Then it could be at 2.60 euros per gram if retailers offer cannabis at a gross price of 10 euros. Gross price, because sales tax of 19 percent would be deducted, on which the state also earns.

With a total requirement of 250 tons, a cannabis tax could therefore flush 650 million euros into the state coffers, the sales tax additionally an additional 404 million euros.

Money cloud also for the social funds

It does not stay that way. Each state-regulated trade chain generates trade and corporate taxes, which of course also applies if the flourishing black market becomes a legal industry.

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Haucap has looked at these estimates as "sufficiently comparable" to the cannabis market - the tobacco market is one of them. So he comes to a commercial and corporate income of more than 113 million euros.

Finally, payroll taxes and social security contributions would be added. According to the study, it could be expected that nearly 20,000 jobs would be created: for example, hemp could largely be produced and processed in Germany, unlike tobacco. This would generate a wage tax revenue of around 145 million euros.

In addition, pension, health and long-term care insurance for these employees could add up to more than € 279 million. That too is no trifle.

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