Caribbean governments contemplating the decriminalization of the cannabis industry have been warned by one United States expert not to overtax the sector.
Jamaica and Antigua already have decriminalized the use of small amounts of the herb for personal consumption, with the recently elected Mia Mottley-led administration in Barbados promising to consult with Barbadians on the decriminalization of recreational marijuana.
Brian Staffa, chief strategist at the cannabis consulting company BSC Group, told officials attending Caribbean Week in New York this morning that while taxation may be necessary, governments must strike the right balance in that area.
“The government often assumes that taxation is the cash cow and I just want to give a cautionary tale. While taxation can be one way, taxation directly on the product, directly on the operators that are creating it, and then at some sort of end of the sale perhaps with sales tax, that’s only one portion.
“And I caution to not create too high of a tax burden because you will have a black market continue proliferating, and it will be harder and harder to regulate that programme if it’s too burdensome.”
Equally important, Staffa said, was not to have too low a tax structure, because the programme would not be funded effectively.
He noted that in the case of medical cannabis, there were funding alternatives, for example, low patient fees.
“The big thing is be very cognizant of what the market will bear in your region, and perhaps take note of what black market pricing is, because your ultimate goal is to stamp out that black market, get everybody on to the regulated side because it is much safer, and it is much more beneficial to the local economy” he said.
He explained that in the US where the use of cannabis was now legal, taxes could be as high as 40 per cent, which was proving “a little bit too high and causing some challenges in some states”.
“Colorado is really seen as more of the bellwether in that it’s doing things a little better. Their taxation varies between 23 and 26 per cent, so it’s toward the lower side of that range, and as a general rule, Colorado is the most successful.
“In 2017, in one year they took in $247 million in taxes and fees. That’s just the cannabis programme with which they can do whatever they want from it. And they’ve been putting that back to roads, schools, a whole number of things.”
Staffa told the gathering of ministers of tourism and other industry officials that apart from taxation, there were several other revenue earning opportunities in the cannabis industry, the most important being research.
“Research has been stifled throughout the world, especially in the US, for the last 80 years on cannabis. Mostly because of federal law that disallows it. If you’re looking to establish yourself as a research hub for cannabis, you could be the first to do so and the only other country right now that’s doing anything remotely close is Israel. They’re taking the lead and you can look at them as a great example, but no one else is doing it. Be the first,” he said.
Transportation of people and tourists, as well as construction of buildings for cannabis businesses is another area to be looked into.
“Often in the cannabis space and throughout the industry, it is a social responsibility that we see to be able to take some of the underperforming areas, maybe that ugly duckling building that no one else wants to do anything with, to purchase it at perhaps a little bit of a discounted rate and make that investment to be able to revitalize that area to turn it into something new,” he said, while suggesting that Caribbean brands, and the accompanying licensing opportunities should also be explored.
“When you think of Blue Mountain coffee, it’s only coming from one area for it to be true Blue Mountain coffee . . . . There’s so much history, so much culture, so much heritage that can be built into these types of brands and then taken outside of the country and elsewhere, because people are going to come, they’re going to have that experience in your region and want to relive that over and over again,” he said.
Another area that should not be overlooked, Staffa said, was the potential market for medical cannabis.
“If you are open to the idea and you’re trying to understand how best to be able to capitalize on the medical cannabis tourism market immediately, as you’re developing your programme you must consider what we call reciprocity . . . where so long as the individual coming to your area has a legal right and a legal use in their home country or home state, to be able to use medical cannabis and they can provide that documentation, they will then be able to make that purchase in your country.”
Staffa noted that as of May this year, there were 2.1 million medical cannabis patients in the US. He expects that number to increase to three million by next year, as new programmes in Florida and other states are now coming on stream.
“We should be focused on the baby boomers and potentially that slightly older crowd that has that disposable income. And the great news is that the average medical cannabis patient in the US is 46 years old. Only 27 per cent are younger than 40 . . . which means they’re going to have a lot of disposable income and the means to travel and the desire to travel.
“And one of the biggest aspects of this, when medical patients have found that cannabis works for them, they typically don’t want to give it up. They don’t want to leave it home, just like any other prescription that you won’t want to leave.
‘If you have a destination that is open for medical cannabis patients to come to to purchase legally, you’re going to open up a market that doesn’t yet exist,” Staffa said.