Under current rules, any potential profits from cannabis companies in the Island would be subject to the standard 0% rate of corporate income tax.
But under a proposed amendment to Jersey’s income tax law, the industry would be taxed at 20% from 2022.
The taxation of companies in the industry is ‘one of the measures that has been forecast to help balance budgets by 2024’, according to a proposition lodged by Treasury Minister Susie Pinel, although it is not clear how much tax could raised by the fledgling industry.
The proposition states: ‘It is not yet possible to forecast how much tax will be raised from these measures because the industry is in its early stages and forecasts would be speculative.’
However, taxation of medicinal cannabis growing and processing forms part of plans to raise around £10 million of additional taxation by 2024 in the recently announced Government Plan, alongside a review of commercial stamp duty levels, a full review of residential stamp duty, a reduction in the threshold for collecting GST on imported goods and other measures.
Deputy Chief Minister Lyndon Farnham has said that the medicinal cannabis industry could become a ‘mainstay’ of Jersey’s economy and produce ‘meaningful returns’ within the next three to five years. He has also said that ‘there is great potential not only for financial revenues for the States but also to provide a really sustainable and productive addition to the agricultural sector’.
In 2018, the Island adopted reforms that allow cannabis to be prescribed by doctors for medical purposes, with firms now able to receive licences to cultivate the crop. The proposition said that, to date, two licences had been issued.
Jersey’s medicinal cannabis industry is ‘highly regulated’, according to the amendment, which ‘would only impact a handful of companies’.
‘At the time of writing, two licences for the cultivation of medicinal cannabis have been issued by the Minister for Health and Social Services,’ it added.
A report accompanying the proposed amendment notes that Guernsey already taxes the cannabis industry – having applied a 20% rate since the beginning of 2020.
Writing recently in the JEP, Guernsey Deputy Gavin St Pier said both bailiwicks were on a journey with cannabis, and that taxing revenues could help the public coffers.
He said: ‘Not only is the public perception of cannabis being transformed from gateway-to-hell to wonder drug, it’s being hailed as a potential economic holy grail too: diversifiers for our economies, over-dependent on financial services; and high-value sources of jobs and tax revenues that can revitalise horticultural sectors that had pretty much moved from being an industry to being heritage.’
Minor changes have already been made in the background to Revenue Jersey’s computer systems to ensure that companies are subject to tax at 20% if the draft regulations are adopted, according to the proposition, which added that there were ‘no additional financial or manpower implications’ for Revenue Jersey or the Treasury in collecting any additional revenue.
The government says in the Government Plan that it will support Jersey’s rural economy ‘through the diversification of high-yield crops such as cannabis’.
The proposal for the 20% tax will be debated by the States by 23 November at the earliest.
