March 19, 2014 Leave a comment
Colorado Governor John Hickenlooper says, The marijuana industry was a great supporter of our very stiff tax rates generally they ve been supportive of our pretty stiff regulation, Colorado marijuana tax rates relatively aren t very stiff at all Whatever assumptions you use, those taxes add up to less than 20 percent of the after tax retail price. That’s less than Colorado taxes cigarettes. European cigarette taxes almost always account for over 75 percent of the retail price often, over 85 percent.
How can a 15 percent wholesale tax, a 10 percent retail tax, and a 2.9 percent sales raise less than 20 percent of the final price? Because the base of the wholesale tax is so small the wholesale price is very small compared to the retail price. The Governor s estimates (more ambitious than the Legislature’s when it comes to taxes) call for the first full fiscal year of recreational marijuana sales to bring in $125,008,337 in total from the three taxes, and $612,785,960 in pre tax price. The wholesale tax is estimated at $45,958,948. The estimated retail tax of $61,278,598 and the 2.9 percent sales tax of $17,770,793 add to that pre tax price of $612,785,960 for a total after tax price of $691,835,351. Total taxes, $125,008,337, are just over 20 percent of the $612,785,960 pre tax price, and just over 18 percent of the $691,835,351 after tax price. In percentage terms, that’s less than the combined federal ($1.01) and Colorado ($0.84) excise taxes per pack of cigarettes, which sell there, after tax, for about $6 a pack.
To see what very stiff tax rates look like, look at Europe s rates on cigarettes. Official chart linked here and copied at European tobacco taxes 2014 Table column 8 on page 6 shows total taxes as a percentage of WAP weighted average price. In the United Kingdom, taxes are 87.5 percent of that retail price. The government gets 87.5 percent the entire private sector supply chain, from farm to retail store, gets 12.5 percent. And the U.K. is not an outlier Greece gets 87.45 percent Poland gets 85.01 percent. Of the 28 countries in the Union, only little Luxembourg has a rate below 75 percent. Those countries don’t burden the marijuana trade with anything like our Federal Tax Code section 280E, but the Governor’s point was about rates.
Looking at it another way, in the U.K., the state gets 87.5/12.5 of what the private sector gets, or 700 percent. That s stiff.
Europe has stiff cigarette tax rates. Make taxes too stiff and you allow bootlegging problems. That’s a good reason not to have stiff taxes at first, especially at first. And stiff tax rates would simply not allow recreational marijuana to compete with Colorado’s tax free medical marijuana. But for recreational marijuana, Colorado is not yet dealing with “very stiff tax rates.”
Leave a Reply Cancel reply Enter your comment here…
Fill in your details below or click an icon to log in
Email (required) (Address never made public) Name (required) Website
You are commenting using your account. ( Log Out / Change )
You are commenting using your Twitter account. ( Log Out / Change )
You are commenting using your Facebook account. ( Log Out / Change )
You are commenting using your Google account. ( Log Out / Change )
Connecting to %s
Notify me of follow up comments via email.
Have eu plans to regulate e-cigarettes as medicinal products gone up in smoke? – lexology
The European Parliament rejected Commission proposals under the Tobacco Products Directive (“TPD”) to regulate e cigarettes as medicinal products in October 2013, but what does this mean in practice for the regulation of e cigarettes across the 28 EU Member States?
At present e cigarettes are regulated in a variety of ways across the various Member States across nine members states (including the UK) there are no specific rules relating to e cigarettes only existing consumer product safety legislation currently applies. In another eleven Member States (including Germany and the Netherlands), e cigarettes are considered medicinal products which subjects the products to stricter regulation. At the extreme, currently e cigarettes are prohibited in Greece unless specifically approved by the Health Ministry.
Under the original Commission proposal for the TPD, rules applying to e cigarettes would have been harmonized and e cigarettes would have been treated as medicinal products resulting in stricter regulation and a more costly approval process across the entire EU. Approvals for medicinal products cost on average f200,000 to secure. Regulating e cigarettes as medicinal products would also have limited sales points to pharmacies. The European Parliament rejected this proposal on in October 2013 and has now reached a compromise with the Council which will see the majority of e cigarettes regulated as consumer products.
While this should help to clarify the current regulatory uncertainty, the debate is far from over.
Although the full text of the compromise is not yet publicly available it is understood that the compromise sets mandatory safety and quality requirements, for example on nicotine content, ingredients and devices, as well as refill mechanisms. The new rules also make health warnings and information leaflets obligatory and introduce notification requirements for manufacturers and importers of e cigarettes, stricter rules on advertising and monitoring on market developments.
In relation to refillable e cigarettes the compromise contains a safeguard clause which could result in refillable e cigarettes being banned in the EU in the future.
The new rules are due to enter into force in 2016 (subject to adoption of the TPD in the course of 2014) and as such it is important that all manufacturers, exporters and importers of these products familiarize themselves with these new rules and begin considering securing any approvals that are necessary to ensure a smooth transition and continued access to the EU market.