Cabinet approves a compromise

The federal cabinet approved a government bill on Wednesday, 14 October 2026, that introduces a tax on sugar-sweetened drinks. The coalition of the Union and the SPD had settled its dispute the day before, on Tuesday, 13 October. The Chancellery had halted an earlier draft from Finance Minister Lars Klingbeil (SPD) in early October, and the compromise replaces it. CSU parliamentary group leader Alexander Hoffmann had demanded on the morning programme of n-tv that the tax start only on 1 January 2028, a demand that did not prevail. The parliamentary groups of the Union and the SPD must now deliberate on the bill and pass it, and it can still be changed there.

Two rates and what is taxed

The bill sets two rates per litre depending on sugar content. Drinks with 5 to under 8 grams of sugar per 100 millilitres would pay 26 cents, and drinks with 8 grams or more would pay 32 cents. An earlier three-tier version had set 26 cents from 5 grams, 32 cents from 7 grams and 38 cents from 10 grams. According to the Finance Ministry, lemonades, iced teas, energy drinks, fruit juice drinks with added sugar, sweetened syrups and fruit nectars fall under the tax. Alcoholic drinks and alcohol-free beer, wine and cocktails are excluded, as are pure fruit and vegetable juices, unsweetened spritzers, milk and oat or rice drinks. Zero drinks sweetened with sweeteners are also exempt, which drops an idea that officials in the ministry had considered earlier.

Prices and revenue

Whether shop prices rise depends on the producers, who can pass the tax on, absorb it or cut the sugar in their recipes. Under the bill, a 0.33-litre can of Coca-Cola would become about 11 cents dearer. The federal government expects 690 million euros in 2027, a partial year because the tax starts mid-year, and a full-year yield of 820 million euros for 2027. Figures for later years differ between reports: one set gives 925 million euros for 2028 and 875 to 890 million euros a year afterwards, while another gives 450 million euros a year from 2028. The revenue is meant to keep statutory health insurance contributions stable. The tax was first planned as an earmarked levy for health insurers from 2028, but constitutional concerns turned it into a consumption tax handled by the Finance Ministry.

Exemptions and EU approval

Small and independent producers with an annual output of up to 70,000 litres would be exempt. The government also wants to exempt all firms producing up to one million litres a year, but that exemption needs approval from the European Commission. If the Commission vetoes it, the 70,000-litre exemption is to remain as a fallback. The exact limits for small producers are still open.

Objections from the states and industry

Hesse's Minister President Boris Rhein (CDU) called the levy a "Teuer-Steuer", a tax that makes things dearer. He told the Kölner Stadt-Anzeiger that rising living costs are one of Germany's biggest problems.

I consider a sugar tax the wrong signal, since it is not about promoting health but about asking citizens to pay for the federal government's budget holes.

Rhein also argued that the tax endangers jobs in the beverage industry, which is largely made up of mid-sized firms. The beverage industry warned again of a heavy burden for its sector. A few days before the cabinet decision, nine agriculture and consumer protection ministers from the Union in the states had written to Chancellor Friedrich Merz (CDU) to oppose the plan, and criticism from the states continues.