12% of Israelis consume cannabis
Making cannabis laws in Israel similar to the laws of alcohol would bring into the coffers of the Jewish state approximately 2.5 billion a year, according to the Jerusalem Institute for Market Studies new research on Cannabis legalization: “This policy will contribute to the Israeli society, we strongly recommend full scale legalization.”
A new study by the Jerusalem Institute for Market Research sheds light on the Israeli cannabis consumption habits and presents data on the huge amounts that the State of Israel could produce in a year if the cannabis market is fully regulated. This research, conducted under the management of Yossi Tegger, was made due to a jointly request of the Israeli Cannabis Magazine with “Yedioth Ahronoth”, Israel’s most widespread newspaper, which points to an increase of about 850 million NIS (about 175 million GBP) from the previous report made on the Israeli cannabis market by the institute five years ago (2013).
The researchers gave a conservative estimate that Israel has only 1,172,200 cannabis consumers, out of just over 8 million (about 12%). The average amount of Israelis’ consumption is also pretty low, and is estimated at 52 grams a year per person (one gram per week). Therefore, the institute estimated that Israel consumes approximately 60.95 tons of cannabis annually, which is sold on average by NIS 100 per gram (more than 20 GBP – one of the highest blackmarket prices in the world), leading to an estimated value of the illegal cannabis market in Israel at 6.09 billion NIS a year – for which no tax is paid at all. The vast majority of the cannabis which is consumed in Israel’s black market comes from illegal local crops, and a small part comes from cross-border smuggling and from the passage of legally-approved medical cannabis that often comes into the hands of ordinary consumers.
12 pounds per gram after legalization
The study further determined that the cost of production of cannabis after legalization will be 7.8 NIS (1.6 GBP) per gram. The distribution and transportation costs will be 0.31 NIS per gram. With the addition of a profit for the production and distribution units. The estimate that the price of cannabis will be 13.6 NIS (2.8 GBP) before tax. Considering that legalization means regulation of a market similar to the alcohol market, the tax calculation in the study was based on the tax the Israeli government imposes on alcohol. Purchase tax of 270% of the wholesale price and 17% Value-added tax lead to a future consumer price of 58.6 NIS per gram of Cannabis. In other words, for every gram of cannabis sold at 58.6 NIS, 30.5 NIS will go to the state coffers. The sale of 75.73 tons at an average price of 58.6 NIS per gram will yield a turnover of 4.43 billion NIS. From this amount, the State will receive income from purchase tax and VAT in the amount of at least 2.3 billion NIS (about 474 million GBP) annually.This amount may be lower than the amount that Israel earns from taxes on cigarettes (about 6 billion NIS a year),but it is much more than what Israel earns on the taxation of alcohol (about half a billion shekels a year), and it is undoubtedly a great cash flow that can help the Israeli economy.
Saving millions in enforcement costs
In terms of saving money on law enforcement, the researchers calculated that police expenses amount to more than 111 million NIS annually on “cannabis delinquency,” according to a figure of 3,660 files opened in 2015 for use of cannabis in Israel. In addition, legal fees estimated at more than 22 million NIS per year are added due to the ‘Cannabis trials’, according to a figure of 1,896 indictments filed against cannabis offenses in 2015. In supplement to the prison expenses, which are according to the calculation standing on 57.8 million NIS, which are wasted each year on ‘Cannabis prisoners’, Israel will be able to save an additional 190.8 million NIS annually, totaling at a 2.49 billion NIS per year.
“Legalization will greatly contribute to the economy and society in Israel”
The researchers further emphasize that legalization will not lead to any serious negative consequences and will contribute to the acceleration of the labor market, new employment opportunities, agricultural development, research, medicine, commerce, recreation and tourism, as well as causing damage to the black market and illegal trafficking in cannabis.
“We believe that the legalization of the Israeli cannabis market will not have negative social consequences, such as increased crime, increased use by youth or a rise in road accidents, as a result of data we collected from the US and the studies on the inverse relationship between alcohol use and cannabis.”
“Our recommendation, derived from the great economic advantages, from an analysis of social impacts on US states and public opinion in Israel – is to fully legalize cannabis,” the researchers concluded. “Adopting this policy will contribute greatly to the citizens of the state, to the economy of the state and to the Israeli society.”
Originally published in Weed World Magazine Issue 134
