Taxes: Chancellor's Office temporarily stops Klingbeil's sugar tax

The Federal Chancellery has temporarily halted Chancellor Lars Klingbeil's proposal to introduce a tax on sugary drinks, according to government sources. This information was reported by Deutsche Presse-Agentur earlier, following an initial report by "Bild". Klingbeil submitted his plans to the ministry for ministerial approval just on Wednesday.

Government sources now indicate that his draft deviated from the proposal of the Health Finance Commission, and is thus not majority-supported within the government. The Finance Ministry has not yet provided a comment on the matter. The proposed tax revenue was estimated at around one billion euros. Klingbeil's goal was not only to generate revenue for the federal budget but also to incentivize beverage manufacturers to reduce sugar content and make their products healthier.

The tax would apply to all drinks with a sugar content of five grams or more per 100 milliliters. Zero-calorie sweetened drinks, fruit and vegetable juices, non-alcoholic beer and non-alcoholic wine are exempted. The tax rate would depend on the sugar content, ranging from 26 to 38 cents per liter. The tax is expected to take effect from July 1, 2027.

The Finance Ministry anticipates annual revenues of about one billion euros, with 945 million euros in the upcoming year and increasing to 1.155 billion euros in the second year and 1.18 billion euros by 2031. However, the proposal has faced opposition, particularly within the Union faction and in several German states. Hess's Prime Minister Boris Rhein (CDU) called it a "burden for medium-sized beverage manufacturers". Business leaders also immediately expressed criticism.