Finance: Coalition finds budget compromises – sugar tax later

Berlin. The black-red coalition has agreed on compromises on several points of contention in negotiations for the 2027 federal budget. The sugar tax on heavily sweetened drinks is now not due to come until the beginning of 2028, a few months later than planned. A planned new tax on plastic packaging will not be levied next year for the time being. At the same time, the reduction in electricity tax for everyone, which was strongly supported by Chancellor Friedrich Merz (CDU), is becoming increasingly unlikely.

The SPD and Union factions met in the evening for special meetings on the budget. While the SPD finished after three quarters of an hour, the Union met significantly longer. The atmosphere was “poor,” it was said from those around. The coalition is under time pressure with its negotiations, as the Bundestag's powerful budget committee is scheduled to meet this Thursday for the so-called adjustment session on the 2027 budget.

The Union and the SPD have not yet found any financing to ease the burden on energy prices. According to information from the coalition factions, the issue is not completely off the table: theoretically, they could still finance the around 5.4 billion euros needed to reduce it to the European minimum at the budget adjustment meeting tomorrow. In this session, final changes will be made to the budget for 2027 before it is voted on in the Bundestag at the end of November.

However, the budget is already extremely tight; the budget managers of both factions have gone through lists of subsidies and other items and have not yet found any room for maneuver. It is therefore unlikely that the relief can come at the beginning of the year, as Merz wanted.

In the coalition agreement, the Union and the SPD agreed to reduce electricity taxes for everyone to the European minimum. However, this has so far only been implemented for the manufacturing industry and agriculture and forestry.

According to the draft introduced by the cabinet, the sugar tax should start on July 1, 2027. However, the Union had advocated a later start on January 1, 2028, also to enable manufacturers to change recipes. The tax will now be levied in three instead of two stages based on the sugar content, as the “Lebensmittel Zeitung” initially reported. It should apply, among other things, to colas, lemonades, iced teas, energy drinks and fruit juice drinks with added sugar.

Criticism came from the industry. A third tax level would place an additional burden on consumers, explained the trade association for alcohol-free drinks. The later start date does not offset the permanent higher burden. The Union and the SPD had agreed to introduce the tax as part of the passed law for stable health insurance contributions.

According to coalition circles, an agreement was reached to reverse cuts in social policy projects. This involves, for example, the immediate child allowance for low earners.

According to the SPD, there should be no cuts of 300 million euros in housing benefit. Secretary General Tim Klüssendorf told “Stern” that this is important so that hundreds of thousands of people are not left alone with rental costs. SPD specialist politician Hendrik Bollmann said: “Although there will be no adjustment on January 1st, all cuts planned beyond that are off the table.”

The Union also wanted to fully compensate for the cold progression in income tax caused by inflation. This occurs when incomes rise due to inflation, which means you pay higher taxes but can no longer afford more with your money. A solution to this has not yet been announced.