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A Consideration of the Potential Taxation of Cannabis in South Africa

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A Consideration of the Potential Taxation of Cannabis in South Africa A Consideration of the Potential Taxation of Cannabis in South Africa C D TAYLOR orcid.org/0000-0001-6561-2006 A mini-dissertation submitted in partial fulfilment of the requirements for the degree Magister Commercii in South African and International Taxation at the Potchefstroom Campus of the North-West University Supervisor: Prof Karina Coetzee Graduation: December 2020 Student number: 31370772 DECLARATION I declare that the mini-dissertation titled ‘A consideration of the potential taxation of cannabis in South Africa’ is my own work, that all sources used or quoted have been indicated and acknowledged by means of complete references and that it has not been previously submitted by me, or another person for degree purposes at this, or another, university. I know that plagiarism is wrong. It is the use of another’s work that is presented to be my own work. I have not allowed, and will not allow, anyone to copy this mini-dissertation with the intention of claiming it as his own work. i ACKNOWLEDGEMENTS I am grateful and appreciative of the following persons: Firstly, thank you to our Heavenly Father, who gave me the intellect, strength, health and willingness to pursue my goals further, Philippians 4:12 ‘I can do all things through Him who strengthens and empowers me.’ I would like to express my sincere gratitude to my dissertation supervisor Professor Karina Coetzee, who allowed me to choose my research topic and explore a field of research that was completely new to me. She remained calm and was always willing to assist in times of difficulty. My sincere thanks also to Lizelle Snyman of North-West University’s library, who provided valuable guidance on potential sources of literature and Elsa Esterhuizen who took care of the referencing of some of the more obscure literature that were sourced. Last, but by no means least, I would like to thank my husband, George Taylor, for his belief in me, moral support, understanding and always motivating me to higher standards. ii ABSTRACT Taxation is part of the daily lives of most persons in the world. A new product supplied into a market is likely to be subject to some form of taxation. Taxation of a new product for example cannabis requires rigorous planning due to its diversity and complexity. South Africa has a long way to go considering the possible legalisation of cannabis and the resulting tax legislation of it. The most recent changes made were the finalisation of the Cannabis for Private Purposes Bill of 2020. According to a Government statement released on 06 August 2020, the submission to Parliament was approved by the Minister of Justice and Correctional Services and noted in the Government Gazette no 43595, vol. 662 on 07 August 2020. The mini-dissertation does not include this latest legislation, due to not being approved by Parliament yet. Certain countries including various American states have not yet approved cannabis legislation. They have, however, legalised the recreational and medicinal use of it. Many other countries are exploring the possibilities should the use of cannabis no longer be prohibited. Due to a lack of appropriate data and studies in South Africa, international studies and legislation could be used to supplement this shortage of information to formulate tax policies for cannabis in South Africa. This report confirms that by legalising the recreational and medicinal use of cannabis, a government may reap enormous financial benefits, bearing in mind its versatility. Careful consideration is needed in establishing the best tax policy, to avoid subjecting cannabis to over tax. New taxes are not required but rather that existing tax legislation should be enforced. iii GLOSSARY OF TERMS Term Definition Cannabis Cannabis sativa, also known as hemp, is a species of the Cannabaceae family of plants. Cannabinoid Characterised by chronic cannabis use, cyclic episodes of nausea Hyperemesis Syndrome and vomiting, and frequent hot bathing. Criminalised Turned into a criminal offence by making it illegal. Dagga A common South African term for cannabis, also known as weed or marijuana (marihuana). Decriminalised Cease to treat (something) as illegal or as a criminal offence Hemp Sativa L, is an industrial crop cultivated all over the world Legalisation This is the process of changing the legal status of an activity to be permissible by law. It may still be regulated by law enforcement or other regulatory bodies. Schizophrenia Mental (complex brain) disorder. Sin taxes Excise duty and a levy imposed on high-volume daily-consumable products. iv TABLE OF CONTENTS DECLARATION ......................................................................................................................... I ACKNOWLEDGEMENTS ......................................................................................................... II ABSTRACT ............................................................................................................................. III GLOSSARY OF TERMS .......................................................................................................... IV CHAPTER 1: INTRODUCTION ................................................................................................ 1 1.1 Background ...................................................................................................... 1 1.1.1 The history of cannabis ....................................................................................... 1 1.1.2 Versatility of cannabis ......................................................................................... 2 1.1.3 Progress in legalising cannabis in South Africa................................................... 3 1.1.4 Medicinal application .......................................................................................... 5 1.1.5 Taxes (including excise duties, levies and value-added tax) ............................... 6 1.2 Motivation of topic ............................................................................................ 7 1.3 Problem statement ........................................................................................... 8 1.4 Research objectives ......................................................................................... 9 1.4.1 Main objective..................................................................................................... 9 1.4.2 Secondary objectives .......................................................................................... 9 1.5 Research design and methodology ................................................................ 9 1.5.1 Research design ................................................................................................. 9 1.5.2 Research methodology ..................................................................................... 10 1.5.3 Conclusion ........................................................................................................ 12 1.6 Overview of the chapters ............................................................................... 13 v CHAPTER 2: EXPLORING MULTIPLE USES OF CANNABIS ............................................. 14 2.1 Introduction .................................................................................................... 14 2.2 Medicinal use of cannabis ............................................................................. 15 2.2.1 Treatment of different conditions ...................................................................... 18 2.2.1.1 Alzheimer’s disease .......................................................................................... 18 2.2.1.2 Seizure disorders .............................................................................................. 18 2.2.1.3 Cancer cell killing at the animal testing stage ................................................... 18 2.2.1.4 Other conditions ............................................................................................... 18 2.2.1.5 Synthetic prescription cannabinoid products ..................................................... 20 2.2.2 Method to obtain medical cannabis in America ................................................. 20 2.3 Recreational use of cannabis ........................................................................ 20 2.3.1 Different ways to use cannabis ......................................................................... 21 2.3.2 Short-term side effects ...................................................................................... 22 2.3.3 Long-term side effects ...................................................................................... 22 2.3.4 Other health effects .......................................................................................... 23 2.3.4.1 Physical effects ................................................................................................. 23 2.3.4.2 Mental effects ................................................................................................... 24 2.3.4.3 Other points to remember ................................................................................. 24 2.4 Industrial use of cannabis (Hemp) ................................................................ 24 2.4.1 Hemp history .................................................................................................... 26 2.4.2 Hemp uses ....................................................................................................... 27 2.5 Cannabis and religion ...................................................................................
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