Germany Delays Its Sugar Tax Until 2028 as Coalition Backs Down in Budget Talks

Germany has put its planned sugar tax on hold. Chancellor Friedrich Merz’s governing coalition agreed late on Wednesday, 11 November 2026, to delay the tax on sugary drinks until 2028, instead of introducing it in the middle of 2027 as planned.

The decision came during tense talks to finish Germany’s 2027 federal budget, worth €555.4 billion (about $616 billion).

The sugar tax was one of the most argued-over ideas in German politics this year. Supporters said it would push drinks companies to put less sugar in their products and help protect children’s health. Critics said it was simply another burden on shoppers at a time when the cost of living is already high. In the end, the budget talks settled the argument — for now — in favour of delay.

At a glance

• What happened: Germany’s coalition agreed on 11 November 2026 to postpone its tax on sugary drinks until 2028.
• When it was due: The tax was supposed to start on 1 July 2027. It will now start at the beginning of 2028 instead.
• What else changed: A planned tax on plastic packaging was shelved, a promised electricity tax cut for households was dropped, and planned cuts to welfare payments for low-income families were reversed.
• Why it matters: The delay shows how tight Germany’s budget has become, and it means drinks makers get at least six more months before they face a tax designed to make them cut sugar.
• What happens next: The coalition must still finish the 2027 budget, and the tax will need to be written into law before it can take effect in 2028.

What happened on Wednesday

The decision was made late on Wednesday evening in Berlin, as negotiators from Merz’s conservative CDU/CSU bloc and its centre-left SPD partners worked through the last remaining disagreements over the 2027 budget. According to Reuters, three senior lawmakers confirmed the agreement in a joint statement.

The sugar tax will now be introduced in 2028 instead of mid-2027, the lawmakers said. Germany’s public broadcaster ARD, reporting through Tagesschau, said the tax would start at the beginning of 2028 and would be charged in three tiers, depending on how much sugar a drink contains.

The same talks produced two other big decisions. A planned tax on plastic packaging will not be introduced for now — a move that costs the budget an estimated €670 million in expected revenue. And the coalition could not find the money for a broad cut to the household electricity tax, which would have cost about €5.4 billion a year. That cut, which Merz himself had championed, has been deferred rather than cancelled outright, but it will not be part of the 2027 budget package.

On the other side of the deal, the SPD secured the reversal of several planned welfare cuts. Payments for low-income parents — the child supplement for families on low incomes — will be kept in place, and planned cuts to Wohngeld, the housing benefit, have been halted. The SPD presented these as protecting low-income families.

What the sugar tax was supposed to be

To understand why the delay matters, it helps to know what the tax was meant to do.

The plan had been taking shape for months. On 14 October 2026, the federal cabinet approved a draft for the levy, described as a “drafting aid” for the governing parties in parliament. Under that draft, the tax was due to start on 1 July 2027.

Drinks containing at least 5 grams of sugar per 100 millilitres would be taxed at 26 cents per litre. Drinks with 8 grams or more per 100 millilitres would be taxed at 32 cents per litre. Small producers making less than one million litres of sweetened drinks a year would be exempt.

The government expected the tax to bring in about €690 million in 2027, its first part-year, and about €925 million in 2028. The new agreement to use three tiers instead of two suggests the design is still being adjusted, but the basic idea is unchanged: the more sugar in a drink, the higher the tax.

Finance Minister Lars Klingbeil, from the SPD, has argued from the start that the tax should do more than fill the federal treasury. His aim, he has said, is to push beverage makers to lower the sugar content of their products and make them healthier. The tax is also linked to efforts to stabilise Germany’s statutory health insurance system, which faces rising costs.

Why the coalition backed down

The sugar tax ran into trouble almost as soon as it was proposed, and the resistance came from inside the coalition as well as outside it.

The CSU — the Bavarian sister party of Merz’s CDU — had already made clear that it preferred a start date of 1 January 2028. Nine agriculture and consumer protection ministers from CDU/CSU-led state governments wrote to Merz to oppose the idea, calling it an exercise in state steering that would needlessly make certain foods more expensive.

Boris Rhein, the CDU state premier of Hesse, joined the critics. He told the Kölner Stadt-Anzeiger newspaper that rising living costs were among Germany’s biggest problems, and that the plan sent “a wrong signal” because it was not about promoting health but about making citizens pay for gaps in the federal budget. He also warned that jobs in the mostly mid-sized beverage industry could be at risk.

The drinks industry itself has lobbied hard against the tax. The German Brewers’ Association and other industry bodies have called for the plans to be stopped or fundamentally revised, arguing that a summer 2027 start was too early.

The budget talks gave the critics their opening. Germany is trying to help its economy recover from war-related energy shocks while also ramping up defence spending after decades of under-investment. With money tight, the coalition had to choose between competing promises — and the sugar tax, the plastic levy and the electricity tax cut all lost out, at least for now.

Who won and who lost

The deal that emerged late on Wednesday looks like a compromise in which each side got something and gave something up.

The SPD came away with the welfare reversals it wanted. Keeping the child supplement and halting the housing benefit cuts lets the party say it protected low-income families in the budget talks.

The CSU got the later start date for the sugar tax that it had been pushing for, and the plastic levy — which industry had opposed — was dropped altogether.

Businesses that would have paid the electricity tax at a reduced rate already enjoy the European minimum rate of 0.05 cents per kilowatt-hour in some sectors, according to Reuters. But ordinary households, who had been promised a broader cut, will not see that relief in 2027.

For supporters of the sugar tax, the delay is a setback. Every month without the tax is a month in which drinks makers face no financial reason to cut sugar. Health campaigners argue that the point of the levy was never mainly the money — it was to change what goes into the bottle. A delay of six months pushes that change further away.

For shoppers, the immediate effect is simple: nothing changes at the till. The price of a bottle of cola or lemonade will not rise because of this tax in 2027. But the tax has not been cancelled, only postponed, so the price question will come back in 2028.

What Britain’s sugar tax shows

Germany is not the first country to try this. Britain introduced its Soft Drinks Industry Levy in April 2018, and the results are now well documented — which is why supporters of the German tax keep pointing to them.

The British levy charges 18 pence per litre on drinks with at least 5 grams of sugar per 100 millilitres, and 24 pence per litre on drinks with 8 grams or more. The design is strikingly similar to the German plan, which uses the same two-tier, threshold-based design.

According to the British government’s own review of the levy, published in 2025, the amount of sugar in soft drinks fell by 46 per cent between 2015 and 2024. Between 2015 and 2019, about 65 per cent of soft drinks that contained more than 5 grams of sugar per 100 millilitres were reformulated to fall below that level. In other words, most manufacturers chose to change their recipes rather than pay the tax.

The same review found that the levy was linked to better health outcomes, including a 12 per cent relative reduction in hospital admissions for tooth extractions linked to tooth decay in children aged up to 18.

Britain is now going further. The government has decided to lower the threshold at which the levy applies, from 5 grams to 4.5 grams of sugar per 100 millilitres, and to remove the exemption for milk-based drinks. Those changes take effect on 1 January 2028 — the same month Germany’s delayed tax is now due to begin.

The contrast is hard to miss. One country is tightening a sugar tax that has been running for eight years; the other has just delayed a tax that has not even started. Supporters of the German levy argue that Britain’s experience shows the policy works. Critics reply that Britain’s tax also raised prices, and that German shoppers should not have to pay more at a time when household budgets are already stretched.

What it means for drinks makers

For Germany’s drinks companies, the delay is breathing space — but not a reprieve.

The tax is still coming, and the companies know it. The question now is what they do with the extra six months. Some may use the time to reformulate their products, cutting sugar so they pay less tax when it finally arrives. Others may simply wait and see whether the tax survives the next round of budget talks.

The British experience suggests that reformulation is the most likely response. When the levy was announced in Britain in 2016, manufacturers had two years’ notice before it took effect, and most of the sugar reduction happened during that window. Germany’s drinks makers now have a similar window — more than a year between now and the start of 2028. But every delay also gives opponents of the tax another chance to argue that it should be dropped altogether.

The bigger budget picture

The sugar tax decision cannot be understood on its own. It is one piece of a much larger budget puzzle.

The 2027 federal budget, worth €555.4 billion, is the first full budget of the Merz government, which took office earlier this year. The coalition is trying to do several expensive things at once: support an economy still recovering from the energy price shocks that followed Russia’s invasion of Ukraine, increase defence spending sharply, and keep the welfare state intact.

Something had to give. In the end, the coalition chose to protect welfare payments for low-income families and to drop or delay new taxes and tax cuts that would have cost the budget money. The sugar tax was caught in that trade-off: it would have raised money, but it was politically costly, and delaying it cost the coalition nothing in the short term.

What happens next

Several things are worth watching in the weeks ahead.

First, the final 2027 budget. The coalition must still agree the last details, and the budget committee will work through them. The decisions announced on Wednesday — the sugar tax delay, the shelved plastic levy, the deferred electricity tax cut and the welfare reversals — will need to be written into the budget documents.

Second, the design of the sugar tax itself. The move from two tiers to three tiers, reported by Tagesschau, suggests the government is still working out the details. How the three bands will be set, and what rates they will carry, has not yet been confirmed. The Bundestag has not voted on the tax, and the draft approved by the cabinet in October was only a starting point.

Third, whether the drinks industry uses the extra time to cut sugar. If manufacturers reformulate before 2028, the tax will raise less money — but that is, in a sense, the point. A tax that raises little because companies have already cut sugar is a tax that has done its job.

And finally, whether the delay becomes permanent. Taxes that are postponed once are often postponed again. Supporters of the levy will be watching closely to make sure that the start of 2028 is a real deadline, not just a new date to be moved later.

Frequently asked questions

What is Germany’s sugar tax?

It is a planned levy on sweetened drinks, designed to push manufacturers to cut the sugar in their products. Under the draft approved by the cabinet in October 2026, drinks with at least 5 grams of sugar per 100 millilitres would be taxed at 26 cents per litre, and drinks with 8 grams or more at 32 cents per litre. Small producers would be exempt.

When will the sugar tax start now?

At the beginning of 2028, instead of 1 July 2027 as originally planned. The coalition agreed the delay on 11 November 2026 during talks on the 2027 federal budget. The tax will reportedly be charged in three tiers based on sugar content, rather than the two tiers in the original draft.

Why was the tax delayed?

The coalition was finalising the 2027 budget and faced competing demands on limited money. The tax had also faced strong opposition from within the coalition — notably from the CSU and several CDU state premiers — and from the drinks industry. Delaying it was part of a wider compromise that also shelved a plastic packaging tax, dropped a household electricity tax cut, and reversed planned welfare cuts.

Will sugary drinks get more expensive in Germany?

Not because of this tax in 2027. The delay means prices will not rise as a result of the levy next year. But the tax has not been cancelled, so prices could still rise when it takes effect in 2028 — unless manufacturers cut the sugar in their drinks first, which would reduce or avoid the tax.

Does a sugar tax actually work?

Britain’s experience suggests it can. Since its levy began in April 2018, the sugar in soft drinks has fallen by 46 per cent, mostly because manufacturers changed their recipes. The British government also links the levy to fewer hospital admissions for tooth extractions in children. Germany’s supporters point to these results; critics argue the tax still means higher prices for shoppers.

Sources

• Reuters — German coalition backtracks on taxes, welfare in budget talks, senior lawmakers say, 11 November 2026: https://live.euronext.com/en/financial-news/german-coalition-backtracks-taxes-welfare-budget-talks-senior-lawmakers-say
• Bloomberg Law — Germany Delays New Taxes, Power-Tax Cut, Rolls Back Welfare Cuts, 11 November 2026: https://news.bloomberglaw.com/daily-tax-report-international/germany-delays-new-taxes-power-tax-cut-rolls-back-welfare-cuts
• Tagesschau (via UA.NEWS) — Germany postpones sugary drinks tax until 2028, 11 November 2026: https://ua.news/en/dovkolo-svitu/u-nimechchini-vidklali-podatok-na-solodki-napoyi-do-2028-roku-tagesschau
• The Berlin Spectator — Germany’s Coalition Ends Feud Over Sugar Tax, 14 October 2026: https://berlinspectator.com/2026/10/14/germanys-coalition-ends-feud-over-sugar-tax/
• UK Government — Strengthening the Soft Drinks Industry Levy — Summary of responses: https://www.gov.uk/government/consultations/strengthening-the-soft-drinks-industry-levy/outcome/strengthening-the-soft-drinks-industry-levy-summary-of-responses
• Action on Sugar — Soft Drinks Industry Levy: http://www.actiononsugar.org/reformulation-/soft-drinks-industry-levy/

This article is for general information and education only. It is not legal or financial advice.