Germany is discussing cannabis taxation before it’s even clear what would be taxed. A Canadian analysis shows that precisely this question determines its effectiveness, and that the obvious answer is the worst approach.
Ontario legalized cannabis for recreational use in October 2018. Taxation works through federal excise tax plus additional provincial levies, employing two different methods: a pure volume tax on processed products like vapes and edibles, and a value tax with a minimum amount on unprocessed products like dried flower and pre-rolled joints, calculated by weight.
The authors analyzed 2,568 legally sold products from March 2022, calculating how much tax applies per milligram of THC and simulating alternative approaches.
The Key Finding
Weight-based taxation creates a lower tax per milligram of THC at high potency levels. This is the logical consequence of the tax base: when you tax one gram with 20% THC the same as one gram with 10% THC, you halve the tax per unit of active compound.
A volume tax based on THC content reverses this. According to the simulation, it generates the highest average tax per milligram of THC across all concentrations, places greater burden on highly concentrated products, and narrows price gaps between concentration levels.
In plain terms: weight-based taxation rewards high potency, while potency-based taxation does not. Anyone wanting to use taxation as a health policy tool must choose the tax base accordingly—not based on what’s easiest to collect.
Why This Matters for Germany
Cannabis taxation is on the table in Germany, and the debate focuses almost exclusively on whether to implement it and expected revenue. The Canadian data demonstrates that the seemingly minor question of tax base determines the health policy outcome, regardless of tax rate.
There’s also a practical angle we’ve encountered elsewhere. We’ve previously analyzed cost per milligram of THC in medical cannabis, showing how prices vary by potency. The same calculation logic applies to taxation, just with opposite implications.
The findings have limitations. Data comes from a market with licensed retail and is three years old. The mechanism behind the finding, however, isn’t market-specific—it’s mathematics.
Source: Sornpaisarn B. et al., „Canadian taxation methods for cannabis: an examination of the impact of different tax methods based on legal products sold in Ontario“, Journal of Cannabis Research, September 9, 2026, DOI 10.1186/s42238-026-00499-5.
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