German coalition splits over finance ministry plan to tax sugar and zero-calorie drinks

Scope of the finance ministry proposal

The German Federal Ministry of Finance, led by Vice Chancellor Lars Klingbeil (SPD), drafted a three-tier tax plan for sweetened beverages starting in 2027. Under the draft key points paper, beverages containing 4.5 grams of sugar per 100 milliliters face a levy of 26 cents per liter. The rate rises to 32 cents for drinks containing seven grams of sugar, and reaches 38 cents per liter for those with ten grams or more. In addition to sugar-sweetened drinks, the finance ministry proposes applying the base rate of 26 cents per liter to zero-sugar beverages sweetened with artificial substitutes. The tax covers lemonades, fruit nectars, fruit juices from concentrates, oat milk, ready-to-drink coffees, iced teas, and non-alcoholic beer and wine. Pure milk and 100% fruit juices remain exempt from the levy.

The ministry explained its rationale for broadening the scope in its internal draft paper.

The inclusion of syrup, concentrates, and granulates in the tax scope is necessary to prevent substitution trends known from other countries.

Opposition from the agriculture ministry

The Federal Ministry of Food and Agriculture, headed by Alois Rainer (CSU), lodged a formal reservation against the draft in a letter dated 12 August 2026. The agriculture ministry argued that Klingbeil's draft deviates significantly from the framework established by the Health Finance Commission (FKG). The independent expert commission had recommended a two-tier tax modelled on the British system, with thresholds of 25 cents per liter at five grams of sugar per 100 milliliters and 32 cents at eight grams. Rainer's department contended that adding a lower 4.5-gram entry threshold, three tiers, and non-sugar sweeteners overextends the expert mandate.

The agriculture ministry also noted that taxing artificial sweeteners removes incentives for consumers and manufacturers to switch away from high-sugar recipes. Furthermore, the ministry requested delaying implementation beyond 2027 to give the food and beverage industry sufficient time to adapt formulations and logistics.

Revenue projections and budget allocations

Financial projections form another central division between the coalition partners. The original health reform package passed by the cabinet in late April 2026 intended the beverage levy to stabilize the statutory health insurance system, targeting 650 million euros in 2027 and at least 450 million euros annually starting in 2028. However, joint calculations by the economy and agriculture ministries estimate that taxing soft drinks under the new draft would generate roughly two billion euros each year. The finance ministry intends to direct the excess funds into the general federal budget to close fiscal deficits.

Parliamentary pushback and mediation

Opposition within the governing coalition extends to the Union parliamentary group in the Bundestag. Health policy spokesperson Simone Borchardt stated clear resistance to including sugar-free products in the tax base.

I reject a tax on zero drinks in the clearest terms.

Borchardt argued that taxing sugar substitutes contradicts health policy objectives and breaches earlier coalition agreements. With the agriculture ministry blocking the key points paper, the Federal Ministry of Health under Carsten Linnemann (CDU) faces the task of mediating between the SPD and CSU positions. While the finance ministry stated that lead responsibility for the project rests with the health ministry, Linnemann's office did not immediately respond to media inquiries regarding the timeline for coalition talks.