What is the Contribution of Illegal Drugs to the Australian Economy

How Much Money Do The Illegal Drug Business Contribute To The Australian Economy

The illicit drug business is a problem for the global economy as a whole, however, in spite of being a significant problem not just from the economical standpoint but also from mental and physical health and socio-cultural standpoint, the world has collectively not been able to control this menace.

The illicit drug trade is a billion if not trillion dollar industry globally, it is a black market which means that it passes under the tax radar, governments cannot tax illicit drug trade, and this makes matters worse for every government.

Illicit Drug Trade Cannot be Taxed

Illicit drug trade cannot be taxed, it is a crime, and it causes not only mental and physical health-related problems but also social problems like secondary crime done by people under the influence of drugs. When all of these things are combined, they cause a lot of damage to the economy because it is crucial to understand that money that is used to buy illicit drugs, leaks out of the economy thereby creating a negative impact.

For instance, if you go to buy a prescription drug from a store, you pay for those drugs and the store owner pays taxes on their income and they declare their income for the purpose of filing their tax returns. The money remains in the circulation in economy and this rolling of money from the buyer to the store owner to the government helps the economy.

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The Black Economy

Now when someone purchases illicit drugs from a drug dealer, the money goes into the black economy. The moment that person pays the drug dealer that money disappears from the flow because the drug dealer cannot disclose this money as his legitimate income. So what do drug dealers do with their money? Money earned from illegal activities is either laundered offshore or invested in more illegal activities.

If we look at Australia then according to the Illicit drug data report 2017-2018, Australia has the highest street value of illicit drugs in the world.  According to the report in 2018 alone, approximately $5 billion worth of illicit drugs were seized by the authorities. Meth remains the most widely used illicit drug in Australia with its annual consumption reaching almost 10,000 kg, followed by Cannabis, Heroin and Cocaine.

The following infographic shows the methods through which illicit drugs enter Australia.

This is truly eye-opening as it shows just how deeply the illicit drug trade mafia is entrenched, as it uses almost every mode of communication and transportation to illegally import these drugs into the country. his alone causes a loss of billions in tax revenue. In addition to this, drugs are also produced, sold and consumed locally.

According to this report, the black market for illicit drugs is relatively stable. Still, a rising trend can be seen in the increase in demand and usage of Cocaine.

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Australians Spent Approximately $13.5 Billion on Illegal Drugs

According to research conducted by RBS, Australians spent approximately $13.5 billion on illegal drugs in 2017-18. According to t this research by RBS an estimated 2% of the banknotes in circulation in the white economy leaked into the black economy through the purchase of illicit drugs. Meth and Cannabis remain the preferred drugs, making up almost 70% of the total share of illegal drugs used in Australia.

The study also shed light on the habits of drug peddlers, as expected it was found out that most drug peddlers settle payments in a face to face situation, relying on cash instead of bank transfers. In cash the drug peddlers prefer to use $50 banknotes more than the other denominations.

So if we add the numbers, then approximately $5 billion worth of illicit drugs were seized by the authorities, and the RBS research states that almost $13.5 billion were spent on the purchase of illicit drugs by Australians. This, at the very least, gives us a rough lower limit of approximately $18 billion illicit drug market in Australia. This, of course, is a rough estimate because the very nature of this market means that it cannot be accurately quantified.

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Loss of Revenue to the Government

The baseline figure of $18 billion means that firstly the actual figure can be quite high and secondly this $18 billion can be translated as a loss of revenue that the government has to face. Lastly, this means that Australia has an underlying problem of a drug mafia that is not only fueling drug usage but also possibly crime and other activities that may be detrimental for the Australian economy and the society. Dealing with this problem however is not possible for the government alone, to deal with this a national strategy needs to be in a place where the people need to be educated on the harmful effects of drug addiction and the penalty for those found involved in such activities. This menace can only be controlled if both the government and the people work together to eliminate it.

Main Image Source : Pixabay

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Dave P
Dave P
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