MONTEVIDEO (Reuters) – Uruguay will exempt marijuana production and sales from taxes in a bid to ensure prices remain low enough to undercut competition from black market pot smuggled in from Paraguay, according to consultants advising the government on a legalization plan.
Congress approved a law allowing the cultivation and sale of marijuana in December, making Uruguay the first country to do so, with the aim of wresting the business from criminals.
“The principal objective is not tax collection. Everything has to be geared toward undercutting the black market,” said Felix Abadi, a contractor who is developing Uruguay’s marijuana tax structure. “So we have to make sure the price is low.”
Uruguay will auction up to six licenses to produce cannabis legally in the next weeks. The government is also considering growing marijuana on a plot of land controlled by the military to avoid illegal trafficking of the crop.
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