New calculations show that even with a scaled-down implementation of the plans to legalize cannabis, the public sector could still experience significant relief. In addition, revenues in the millions are expected.
The planned legalization of cannabis proposed by Federal Health Minister Karl Lauterbach (SPD) will be significantly less extensive than originally planned. There will be no commercial cultivation and no sale of joints in specialized stores allowed. Nevertheless, the state treasury will benefit from the plans.
According to an updated study by Düsseldorf economist Justus Haucap for Handelsblatt, the public sector will see savings and additional revenues totaling 1.1 billion euros. This is a significant reduction compared to the original estimates, which had predicted savings of 4.7 billion euros with full legalization.
The planned legalization of cannabis envisages that possession of cannabis will no longer be punishable in Germany. The traffic light parties SPD, Greens and FDP want to allow the possession of up to 25 grams of cannabis and legalize the cultivation of a maximum of three plants for personal use. Furthermore, cultivation and distribution of the drug should be made possible in special associations. However, the free sale of cannabis for adults in specialized stores will only be tested in a second step and initially in model regions with scientific support.
For the federal government, the financial effects are not the main focus of the planned legalization of cannabis. Rather, the goal is to combat the black market and drug-related crime and to strengthen child and youth protection. Nevertheless, the savings are likely to be very welcome due to the strained financial situation of the public sector.
Expert predicts a demand of 400 tons per year after legalization of cannabis.
According to expert Justus Haucap, the legalization of cannabis in Germany could lead to relief for the public sector. The largest savings of 1.05 billion euros would result from decriminalization and a reduction in the need for police and judicial resources.
In addition, revenues of 28 million euros from income tax and 52 million euros from social security contributions could be generated through the employment of personnel in cannabis clubs. These assumptions are based on initial estimates of how the first step of legalization could be implemented, without taking into account model regions.
Haucap estimates the total annual demand for cannabis at 400 tons, of which 120 tons could be covered through clubs. The number of clubs that will exist is still unclear, but Haucap assumes there will be about 1000 distribution points in Germany, each of which could employ two to three staff members.
Although the legalization of cannabis in Germany could lead to significant savings, there are also significant losses due to the scaled-down plans. A possible cannabis tax alone could have generated revenues of up to 1.8 billion euros per year. In addition, the state could have expected additional revenues of over one billion euros through sales, business, corporation, and income taxes.
The original study by Justus Haucap also anticipated that the legalization of cannabis in Germany would create up to 26,000 new jobs.
Justus Haucap, an expert in the field of economics, expressed his concern to Handelsblatt that the scaled-down plans for the legalization of cannabis in Germany are wasting a lot of potential. He emphasized that this not only concerns tax revenues.
Haucap argued that the limited legalization would make it significantly more difficult to eradicate the black market. A part of the market will thus be left to organized crime, which could have a negative impact on youth and health protection. A truly legalized market with licensing for all value creation stages would achieve better results in this regard.
In addition, the value chains would be much less extensive than with full legalization.
Haucap warns of possible failure of cannabis legalization
Justus Haucap warns that the plans to legalize cannabis in Germany could fail if the establishment of cannabis clubs, cultivation of hemp plants, and processing and sale in the clubs are overwhelmed with excessive bureaucracy. Haucap is calling for a regulatory framework that is as liberal and uncomplicated as possible.
However, a study by the Institute for Interdisciplinary Addiction and Drug Research in Hamburg, commissioned by Health Minister Karl Lauterbach, advocates limiting the commercial market in the interest of health and youth protection. The study refers to experiences in Canada, Uruguay, or some US states, where cannabis has already been legalized. It is expected that consumption will continue to increase in Germany after a possible legalization. According to the authors of the study, health protection for adults is likely to change only slightly in the short term. The study was sent by Lauterbach on Tuesday to the government factions in the Bundestag and the other ministries.
Debate about the approval of THC-containing cannabis edibles remains controversial
The debate about the approval of THC-containing cannabis edibles remains controversial. A study by the Institute for Interdisciplinary Addiction and Drug Research in Hamburg, commissioned by the Ministry of Health, points to the dangers of edibles, especially for children under the age of ten. The number of unintentional poisonings and intoxications in this age group has increased in countries where edibles were legally sold.
The study does not advocate for a general ban, but it calls for legal cannabis products to be designed in a way that is not attractive to this target group. However, the Ministry of Health emphasizes that a ban is essential for the protection of children and adolescents.
In the traffic light coalition, unlike urged by the Ministry of Health, there is a push for the approval of edibles. FDP health policy maker Kristine Lütke argues that this form of cannabis consumption is less harmful to health and therefore must be allowed, otherwise dealers will specialize in it and the goal of pushing back the black market will be missed. However, experts point out that the legal market must be regulated in a way that keeps the increase in consumption at a low level.