Regulating cannabis could help cut Dutch state deficit

13 April 2010
Article

Decriminalizing cannabis in the Netherlands and regulating the back-door of the coffee-shops and cultivation of cannabis would save 160 million euro on expenses by the police and the criminal justice system and bring in 260 million euro in tax revenues. The Dutch government is already earning some 400 million euros a year in corporate taxes from cannabis-selling coffee-shops.

In September 2009, the Dutch government set up 20 working groups of civil servants to look at austerity measures that could get the state's budget back in check. They had to investigate where it could cut spending up to 30 billion euros a year to reduce the state budget deficit. On April 1, 2010, the results were published.

One of the issues one the working groups looked at was decriminalizing cannabis and regulating the back-door of the coffee-shops and cultivation of cannabis. That could save 160 million euro on expenses by the police and the criminal justice system, while it could bring in 260 million euro in extra tax revenues (corporate tax and excise tax).

However, the working group warned that regulating the supply of cannabis would be controversial because of international restrictions laid down in the UN drug conventions and the Schengen treaty.

In the Netherlands so-called coffee shops are allowed to sell cannabis under certain conditions, but large-scale cultivation and buying bulk is illegal. Because of this anomaly in the system, cannabis is allowed to leave the coffee shop through the front door - in quantities of no more than 5 grammes per person - but is not allowed to be delivered to the back door. This has been dubbed the 'back door problem'.

The Dutch government is already earning some 400 million euros a year in corporate taxes from the country's 700 plus cannabis-selling coffee-shops, according to conservative estimates by the TV programme Reporter in 2008. At the time the Dutch finance ministry said that it did not know how much tax the coffee-shops paid. Tax inspectors suggested "they do not want to know about it in The Hague, as it is all much too politically sensitive," according to Reporter. An explanation for the difference between the 260 and 400 million was not provided by the working group.

Meanwhile, the owner of the Netherlands' largest cannabis-selling coffee-shop was convicted for running a criminal organisation that purchased large quantities of cannabis and processed and stored them. The shop regularly had more than the legal limit of 500 grammes on its premises.

The court established that the municipality, police and public prosecutors had facilitated the operations. Tax authorities were aware that large quantities were stored and job centres referred unemployed people to the coffeeshop to apply for jobs.

Nevertheless, despite the large scale complicity of the authorities, the owner of the shop was convicted. A fine of 28 million euros was determined based on the estimated profits. Over only half of that taxes were paid. The coffee-shop owner as well as the prosecutor announced they would appeal. The trial is seen as a test for Dutch tolerant cannabis policy.

The report of the working group (in Dutch) is available here and the full report of the austerity working group here: http://www.rijksoverheid.nl/bestanden/documenten-en-publicaties/rapporten/2010/04/01/15-veiligheid-en-terrorisme/15-veiligheid-en-terrorisme.pdf

Wednesday, April 14, 2010