German Coalition Rules Out Plastic Levy and Delays Sugar Tax
Germany’s governing coalition failed to agree on financing for a broad electricity-tax cut, after budget experts could not settle on counter-financing for the measure.
Negotiators meeting in Berlin hashed out a package that rules out a planned plastic levy for now while delaying a new sugar tax. The Union and the Social Democratic Party (SPD) reached the compromises during all-night emergency sessions, according to reporting by BILD.
The schwarz-rote Koalition reached agreement on several changes to its tax policy plans after a marathon of negotiations on Wednesday. “It was our task to clarify big chunks in advance, and we have succeeded in doing so,” said SPD parliamentary group leader Matthias Miersch. CDU/CSU parliamentary group leader Thorsten Frei (53) spoke of a “thoroughly positive status”.
The sought-after electricity tax cut remains a top priority but lacks a funding source, according to Christian Democratic Union (CDU) parliamentary group leader Thorsten Frei. The reduction could be implemented at a later date, potentially at the beginning of 2028, Frei said late Wednesday night.
“I can only say for our parliamentary group that lowering the electricity tax is our top priority,” Frei said. “We will also try in this sense to implement the common goal as soon as possible.”
Coalition Disagreements on Financing
Neither the CDU nor the SPD could secure backing to fully offset the fiscal impact of cutting the electricity tax or compensating for bracket creep in income taxes. SPD parliamentary group leader Matthias Miersch said that while relief measures are desirable, they require solid financing.
“But you have to finance it solidly — and that’s why we’re going to have to look in the next few days to see if this counter-financing exists, which does not exist up to now,” Miersch said.
The broad reduction would require roughly 5.4 billion euros in counter-financing. The Bundestag budget committee is set to finalize the 2027 federal budget during a clearing session, with the budget already extremely tight and no room for the measure found so far. Theoretically, the Union and the SPD could still mobilize the roughly 5.4 billion euros needed for the reduction at the European minimum level tomorrow during the budget clearing session.
Revised Timelines for Levies
While the electricity tax reduction stalled, discussions over consumption levies yielded concrete shifts. The plastic packaging tax will not move forward, sparing the federal budget from roughly 670 million euros in 2027 revenue. If the plastic tax does not come, Federal Lars Klingbeil (SPD) must forego revenue amounting to 670 million euros for 2027.
The sugar tax on heavily sweetened beverages survived negotiations but faces a delayed start date. Instead of taking effect on July 1, 2027, the levy will launch on January 1, 2028, structured across three distinct tiers based on sugar content rather than two.
The Christian Social Union (CSU) pushed for the delayed start to grant beverage manufacturers adequate time for recipe reformulations. A beverage industry representative criticized the three-tier structure as a revenue-raising measure rather than a health policy tool.
“An additional third tax tier for classic lemonades finally turns the sugary drink tax into a cash-grab tax,” said Detlef Groß, managing director of the German Non-Alcoholic Beverage Association. A crate of cola or lemonade would cost five euros more, he added.
Social Spending Adjustments
In tandem with the tax adjustments, coalition negotiators agreed to roll back previously planned spending cuts within the social sector. Lawmakers decided against reducing the immediate child supplement (Kindersofortzuschlag) aimed at low-income earners.
Additional measures, such as a 20% alcohol tax increase on spirits like vodka, will take effect in January, while a proposed 20% sparkling-wine tax increase was dropped.
The Bundestag budget committee will review the final adjustments before a parliamentary vote scheduled for late November.