Germany's coalition delays sugar tax to 2028, shelves plastic levy, power-tax cut unfunded

Late-night compromises on the 2027 budget

Union and SPD cleared several disputed items for the 2027 federal budget on Wednesday, 11 November 2026, but they did not settle the electricity tax or the inflation offset in income tax. The SPD parliamentary group finished its special session after about three quarters of an hour, while the Union group met for roughly three hours and described the mood as flat (mau). About 20 Union members asked to speak, many of them critical, and one called the plans a disaster. Party leaders stepped in front of the cameras at 23:29.

Frei summed up the state of the talks in cautious terms.

We are not quite at the end yet, if you like.

Frei added that some points the Union regards as important still lack counter-financing. CSU parliamentary group leader Alexander Hoffmann said the government draft had caused considerable discussion within the groups, but argued that the coalition had solved every challenge so far and would manage the 2027 budget too.

Sugar tax moved to 2028, plastic levy shelved

The sugar tax on heavily sweetened soft drinks will now start on 1 January 2028 instead of 1 July 2027, and it will be levied in three stages rather than two. The federal cabinet had approved the tax in mid-October at the SPD's request, and Union negotiators pushed for the later start partly so that lemonade makers could reformulate their recipes.

The planned tax on plastic packaging will not be levied in 2027. Frei said on Sunday, 8 November, on ZDF's Berlin direkt that the tax would not come because of its economic and ecological effects. SPD parliamentary group leader Matthias Miersch replied that a first draft already existed, so the matter was not yet closed.

Handelsblatt reported that a planned 20 percent increase in the sparkling wine tax is also off the table. Alcohol taxes will still rise in other ways, since the alcopop tax on sweet drinks containing alcohol will cover drinks of up to 15 percent alcohol instead of up to 10 percent.

Electricity tax cut left without funding

The coalition did not find the money to lower the electricity tax for everyone to the European minimum, a step stern put at about 5.4 billion euros. Coalition sources told stern the idea is not entirely off the table, since the budget committee could in theory counter-finance it on Thursday, although both groups' budget negotiators have so far found no room in the budget. The coalition agreement had promised the cut for all, but it has so far been implemented only for manufacturing and for agriculture and forestry.

Frei put the Union's position this way.

For our parliamentary group I can only say that cutting the electricity tax has top priority.

Welt reported that Frei said the cut had not been cancelled but would come later, around the start of 2028. Miersch said such relief was desirable but must be financed solidly, and that the counter-financing was still missing. The full offset of cold progression, the inflation adjustment in income tax, also remains open, and the coalition must still address energy-price relief once the fuel discount (Tankrabatt) expires at the end of the year.

Social cuts reversed, Elterngeld reshaped

The SPD pushed through the withdrawal of several cuts that hit families. The Kindersofortzuschlag, a monthly supplement of 25 euros for children at risk of poverty, will not be cut, which means it continues for nearly three million children, according to Handelsblatt. Asylum seekers are the exception. The Wohngeld housing benefit stays in its old form, and a planned adjustment for 2027 is suspended.

Elterngeld will still run for 14 months, but the replacement rate changes. Parents would receive 80 percent of lost income in the first four months for each parent and 50 percent afterwards, compared with 65 percent throughout the period so far. Family minister Karin Prien (CDU) withdrew her plan to cut the benefit to 12 months after criticism.

The basic income support (Grundsicherung) gets another zero round in 2027, affecting seven million recipients. The Union had wanted the standard rates cut by between 5 and 7 euros, which would have been the first fall in the Bürgergeld, but it could not push that through.

What happens next

The budget committee holds its Bereinigungssitzung on Thursday, 12 November, where the last details are fixed. The Bundestag votes on the budget at the end of November.

Miersch said the coalition would look over the coming days at whether the counter-financing materialises, which it has not yet. Stern cited coalition sources saying the budget is already extremely tight, which makes the start-of-year electricity tax relief that Chancellor Friedrich Merz wanted unlikely. Frei said the cut was not cancelled, but the Bundestag vote is still weeks away.