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Legalising cannabis could earn Australia $28 billion, federal figures show

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The Australian government could earn upwards of $30 billion over a decade by legalising and taxing cannabis, according to fresh policy costings from the Parliamentary Budget Office (PBO).

PBO figures published by the Greens this week show a legal cannabis industry could generate $28 billion in public revenue over a decade if taxed at 15 per cent, or $36 billion at 25 per cent.

Under a proposal pitched by the Greens, a new federal agency would regulate cannabis prices and act as an intermediary between producers and a new – tightly regulated – retail industry.

Like many countries around the world, Australia has an evolving relationship with cannabis, which was first outlawed by Canberra in 1926.

ACT’s big step

Astonishingly, almost a century after that ban, Canberra in 2020 became the first place in Australia to broadly decriminalise cannabis, with residents allowed to grow plants for their own use at home.

Federally, the Greens are now arguing cannabis should be legalised and regulated, following in the footsteps of nations like Canada and the once drug-abolishionist Thailand.

Greens Senator David Shoebridge says billions in tax revenue from legalising cannabis could be used to lift JobSeeker by $80 a fortnight or build 88,000 new public housing units nationwide.

“When we legalise cannabis we take billions away from organised crime, police and the criminal justice system,” Mr Shoebridge said this week.

“We can then spend it on schools, housing, hospitals and social support.”

big tobacco investing heavily in cannabis

A woman smokes marijuana at a legalisation party in Toronto, Canada. Photo: Getty

Governments ‘getting more creative’

Richard Holden, an economics professor at the University of New South Wales, said tax has become a bigger part of the push for drug law reform globally, with state and federal governments “getting more creative” to tackle unprecedented public budget pressures.

“It’s taking something that’s on the black market where you don’t get revenue from it and generating revenue from it,” he said.

Deloitte estimates suggest Canada gained $15.1 billion in direct and indirect tax revenue from legalising Cannabis between 2018 and 2021.

In Thailand, which once had some of the most extreme punishments for drugs, cannabis was legalised last year – making global headlines and giving its post-COVID tourism industry newfound momentum.

Professor Holden said existing models for taxing alcohol and tobacco were already generating billions of tax dollars annually in Australia.

However, he said much of this tax revenue offsets public healthcare costs associated with use of these drugs.

The type of law reform would matter too, Professor Holden noted, as a decriminalisation approach like that in Canberra is very difficult to tax.

“If it’s all people growing it in their garage, you will have a hard time taxing it,” he said.

A blow to organised crime

The Greens also predict that a legal cannabis market would push organised criminals out of business, with illegal cannabis sales estimated to fall to just 5 per cent of the market in five years.

“The Greens model creates a right for adults to grow up to six plants at home without being taxed and without having to pay. This costing takes that into account,” Senator Shoebridge said.

“It also guarantees commercial possibilities for co-operatives and local entrepreneurs to grow and sell cannabis, including through regulated cannabis cafes.”

Australia has already created a fast-growing, medicinal cannabis market, which is now booking half a billion in annual revenue and has drawn more than $2 billion in investment, according to the Pennington Institute, a private body that advocates for drug law reform.

In fact, a recent University of Sydney survey of 1600 medicinal cannabis users found 27 per cent are now sourcing the drug from legal prescriptions rather than illegal markets, up from just 5 per cent in 2018.

University of Sydney Professor Nicholas Lintzeris, an expert in addictive medicines, said the findings demonstrate the growth of Australia’s cannabis industry, which now boasts “high quality production standards”.

medicinal cannabis

More than 260,000 Australians have been approved for a medicinal cannabis prescription since 2016.

Regulation

“If we’re going to actually regulate it, well that means we need a source of supply. Who’s allowed to purchase it? What are the conditions? What are the quality standards? And so forth,” Professor Lintzeris said.

“We actually now have an industry which is capable, should Australia go with a regulated [legalised] model … of supplying it [cannabis].”

However, Professor Lintzeris said Australia should proceed carefully and ensure any recreational industry doesn’t undermine the medical uses.

“Legalising cannabis would basically mean almost certainly it’s a consumer model where a person goes to a vendor,” he said.

“That’s perfectly fine if you have people that know what they’re doing, but you still need to look at what the medical prescriptions look like.”

The University of Sydney survey found that only 24 per cent of legal prescription holders found the system “straightforward” and “easy to negotiate”.

Topics: Cannabis
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