Economic effects of legalising cannabis in Spain calculated

17/10/2018

Canada has become the first G20 member to legalise cannabis for recreational purposes. The reasons wielded by Prime Minister Justin Trudeau after taking this decision are diverse, and highlight the need to protect minors. Despite formal reasons, making cannabis legal implies a considerable rise in the direct and indirect taxes collected by the sate, and allow regulating underground workplaces, thereby also increasing the amount of contributions made to social security and income taxes.

The Drug Policies Unit of the Psychology and Speech Therapy Services of the UAB Faculty of Psychology calucated the effects of legalising cannabis in Spain in an analysis published in the October edition of the journal Cáñamo.

According to the analysis, Spain's treasury would collect 3.3 billion euros annually in taxes and social security contributions. A total of 101,569 workplaces would be regularised to produce the 820,597 kilogrammes needed to meet current demands. The legalisation would not represent abolishing the black market, but it would substantially weaken criminal networks given that their market share would lower to 15% of total demand.

The calculations were made taking into account that the cannabis regulation model in Spain would be based on three ways of covering demands: self-cultivation (tax free), social cannabis clubs (with no commercial component, but workers would pay taxes) and free market (subject to taxes). The total business volume would be 8.5 billion euros yearly and 1.021 billion euros would be collected as VAT; 486.6 million euros in special taxes (similar to the tax on tobacco, but with a low imposed tariff to remain competitive with the black market), 371 million in corporate taxes, 1.4 billion in income taxes and contributions to social security (workers of companies, cooperatvies and social clubs) and 26 million in export taxes.