Federal government: Cabinet agrees on sugar tax - but resistance is growing in the Union

Berlin. The cabinet approved the draft law on the controversial sugar tax on Wednesday. Finance Minister Lars Klingbeil (SPD) had previously weakened his draft. The new tax on sugar-sweetened drinks will apply from July 1, 2027, according to the draft available to Handelsblatt. It was “agreed upon by all departments,” the paper says. However, the next resistance is already emerging in the Union faction.

Two weeks ago, the dispute over the sugar tax escalated within the federal government. From the Union's perspective, Klingbeil had significantly expanded the measure. Instead of the originally announced annual income of 650 million euros, he planned for just under 1.2 billion euros. The Ministry of Agriculture and the Ministry of Economic Affairs expressed reservations. The Chancellery initially stopped the draft law.

According to the draft that the federal government has now agreed on, the new tax will be slightly lower. Accordingly, Klingbeil expects revenue of 820 million euros next year. They then increase slightly from year to year and are expected to reach 890 million euros in 2031.

The compromise provides for a two-tier tax and exemptions for smaller manufacturers. From July 1, 2027, a tax rate of 26 cents will apply to sweetened drinks with a sugar content of five grams or more per 100 milliliters. With a sugar content of eight grams per 100 milliliters, the rate should be 32 cents. The tax should not apply to manufacturers that produce less than one million liters of sweetened drinks per year.

The draft is a so-called government formulation aid for the parliamentary groups. There are time reasons for this approach: the sugar tax is important for the 2027 budget, which already has gaps. So that it can be passed in time, the coalition factions are submitting the draft to the Bundestag.

However, that's where the next trouble threatens. Even though the federal government has reached an agreement internally, the project continues to be met with major reservations in parts of the CDU/CSU parliamentary group. More than 20 MPs did not want to agree to the plan, it was said in parliamentary group circles.

There should be resistance primarily from agricultural and economic politicians. The agricultural working group met on Tuesday. Union faction leader Thorsten Frei (CDU) is said to have campaigned for approval there. He also warned against not agreeing to the draft law. “If there is no majority, the coalition will collapse,” he warned.

Participants reported afterwards that Frei had to listen to a lot of criticism. “The AG is on the barricades,” it said. The criticism is based on factual considerations: a new tax on sugary drinks makes no sense. It neither changes consumer behavior when it comes to sugar nor does it help companies, for example. On the contrary: many medium-sized beverage manufacturers in particular are threatened with the closure of their operations. The group clearly articulated its concerns two months ago.

On Sunday, the state agriculture ministers from the CDU and CSU warned against introducing the tax in a joint letter to Chancellor Merz and parliamentary group leader Frei. A sugar tax relies on state control and unnecessarily puts an additional burden on the purchase of certain foods and also on companies, criticize the department heads in the letter.

Some prime ministers such as Boris Rhein (Hesse) and Mario Voigt (Thuringia) had also publicly taken a position against the sugar tax. Rhine called it an “expensive tax”.

According to the Union parliamentary group, more than 20 MPs there alone wanted to vote against the tax. There are also major concerns among agricultural experts in the SPD parliamentary group. However, the parliamentary group leadership there is also pushing for the law to be passed now as agreed.

In the opinion of MPs, it is also about credibility in the Union: “We cannot announce on Monday after a presidential meeting that life is too expensive for people and therefore the electricity tax will now be reduced, and then introduce a new tax on food on Wednesday,” said the group. In addition, a federal party conference only rejected the introduction of the sugar tax in February.

There are different assessments as to whether the resistance in the group will continue and the law will ultimately be prevented. From the ranks of financial politicians it was said that ultimately there would be a majority.