Make use of cannabis tax gold mine, say accountants
SA could be sitting on a tax revenue gold mine if it exploited the massive and untapped market for recreational cannabis consumption locally and globally.
This is according to Ettiene Retief, chairperson of the National Tax Committee at the SA Institute of Professional Accountants (Saipa) .
“Although I’m not an advocate of it, I cannot ignore the incredible growth this emerging industry is experiencing and the phenomenal potential it presents for taxation.”
Retief said Colorado in the US is an example.
In 2012 recreational marijuana use for adults was legalised in the US. Since then the state has seen more than $10bn (about R146bn) in total sales and more than $1.6bn (about R23.4bn) in tax on the product.
According to a report released by Saipa, revenue resulted from a 2.9% sales tax on medical and recreational sales, and a 15% excise tax when the cannabis leaves the grower. This excludes tax on industrial hemp, which the state legalised in 2010.
“We’re seeing a similar trend in other countries as governments realise that, with the right controls, recreational and medical cannabis can be exceptionally lucrative,” Retief said.
Saipa said apart from duties and VAT on the production and distribution of legalised cannabis, the “sin tax” on cigarettes and alcohol could also apply to this similar product.
“And that’s just the beginning.”
Retief said: “Let’s not forget the vast supply chain that would emerge, the corporate tax on those activities, including imports and exports, taxable income from the jobs created and much more.”
He said the country could use the product for tourism in the form of “dagga safaris”.
“The government needs to start consulting with stakeholders to determine the best way forward. SA is ideally positioned to take advantage of this tax revenue source and our cash-strapped state cannot afford to dismiss offhand such a sure bet,” Retief said.
Government recently unveiled a master plan aimed at harnessing a R28bn cannabis industry after the department of agriculture, land reform and rural development led a two-year process to craft a strategy for the industrialisation and commercialisation of the plant.
Gauteng premier David Makhura has previously signalled the province intends to bolster its economy by becoming an industrial hub of cannabis. He is working closely with the country’s biggest marijuana company, CBD Full Spectrum, which exports around 80% of their medical marijuana. The rest is consumed in the country for medicinal use.
CBD Full Spectrum CEO Prof Benny De Beer estimated that within two to three years, the industry could create one million jobs.