Since the 11 last April, the Belgian government authorized products intended to be smoked and with a THC content less than 0,2%: considered as 'other smoking tobacco' and will therefore be taxed as such. The newspaper "Le Soir" reveals the results of a study that measures the impact of decriminalization of cannabis on the Belgian public finances.
An estimate of the impact of cannabis legalization on public finances
Forbidden for many years, this plant is still considered a "drug" by United Nationsas well as cocaine and heroin. It is strictly forbidden to market, produce or even possess it, within the meaning of 1961's Single Convention on Narcotic Drugs, signed by more than 180 States. Despite this, the UN lists 192 million users, making it "the most widely used illicit drug in the world."
Legalizing cannabis could bring in exactly 144 million to the state according to "the Friday Group": a think tank bringing together about twenty young bilinguals, has just carried out a study that risks reviving the debate.
Scientists study the consequences for the Belgian public finances of three scenarios of legalization: a simple decriminalization, the state-controlled management and one competitive market.
By taking into account the effects on the costs of justice, public health, new tax revenues ... the authors come to the conclusion that the three decriminalization scenarios would bring money to the State. And it is the scenario of management by the State which would release the highest margin: 144 million euros.
As the elections approach, policy proposals to legalize and regulate the sale of cannabis are emerging. Proponents stress that legalization is needed to better control cannabis use and reduce criminal networks. Opponents of decriminalization or regulated forms of legalization invoke the risks associated with addiction and the trivialization of consumption, pointing to the human and social impacts of such a political orientation.
However, the impact of cannabis legalization on public finances has not been studied in detail. Therefore, in its new report 'Cannaconomics', the Friday Group calculates the impact of possible policy choices on public spending and cannabis revenues. This is a challenge, as there are few reliable studies on the subject, especially when it comes to government spending on cannabis.
Three possible political options
Taking into account the impact of a policy on the selling price of cannabis, the number of users, the price elasticity, the volume of consumption and the turnover linked to the sale of cannabis, the balance sheet has was established for three possible scenarios: decriminalization of consumption, legalization and sale by a public monopoly or legalization and sale through a free market.
Decriminalization removes the ban on the use of cannabis, but still prohibits its sale and production. The increase in the number of cannabis users in this scenario would lead to an increase in healthcare spending of € 14,1 million. However, the costs for justice and the police (only for use, and not for criminal networks linked to the production and sale of cannabis) can be reduced by 56,9 million euros. The result: a reduction in expenditure of 42,8 million euros for the State.
"Legalizing cannabis could bring up to 144 million euros to the state"
What if the government itself controls the production of cannabis, distributes the licenses and determines the selling price? Such a government monopoly has two major advantages: a significant reduction in costs for the police and the judiciary, and an influx of tax revenues estimated at more than 40 million per year. In this scenario, the state could generate 144,6 million euros, while the number of users remains more or less stable due to the increase in prices.
Legalization with a free competitive market for the buying and selling of cannabis appears to be less financially beneficial for the government. Again, new tax revenues would be generated and security spending would be reduced. However, due to a drop in the selling price and a sharp increase in the number of users, the state margin becomes much lower (78,4 million euros). “If the selling price of cannabis were to drop very sharply, for example from 10 to 7 euros per gram, the income from the tax might not be enough to cover the increase in health costs. Consequently, the State risks even posting a negative balance, “explains Julien Raone, economist of the Friday Group.
It remains imperative to examine all aspects of the available policy options. However, on the basis of this study, it is possible to assess to what extent a political choice can free up resources to tackle, for example, prevention or risk reduction ”, explains Audrey Hanard, president of the Group. “Due to the lack of reliable figures, it remains important to interpret the results with caution. But of the three policy choices, the government's monopoly on cannabis sales seems to be the most interesting scenario in financial terms ”.
Download the report here: Friday group