Germany’s proposed plastic tax has also been killed, along with some proposed social benefit cuts, as federal leaders agree to compromises in the 2027 budget.
Germany’s black-red federal governing coalition walked back some of their major planned tax and welfare reforms on Wednesday, delaying the introduction of a tax on sugary drinks, postponing a plastic levy and shelving a proposed tax cut on electricity.
The changes were confirmed by three senior lawmakers, including Union parliamentary group leader Thorsten Frei, and come just ahead of budget negotiations for 2027 in the Bundestag.
Chancellor Friedrich Merz’s conservative CDU/CSU bloc and its centre-left SPD partners are now under time pressure to resolve remaining sticking points involved with Germany’s half-trillion-euro federal budget for next year.
According to the government’s latest plans, the sugar tax on heavily sweetened beverages won’t now come until the beginning of 2028 — six months later than had previously been planned.
Also a planned new tax on plastic packaging has been rejected for the coming year.
Meanwhile the proposal to cut taxes on electricity costs has been shelved.
The electricity tax cut for households had been promised by the governing coalition when it came to power in 2025. Recently it was put back on the agenda, and even strongly supported by Chancellor Friedrich Merz, as the CDU made efforts to rebuild trust following poor election results in eastern state votes and Berlin.
Now it seems the conservative-led government is walking back this promise for the second time, due to financing concerns.
A tax cut on electricity for businesses in certain sectors was applied in 2025.
READ ALSO: Electricity and gas bills in Germany expected to rise in early 2027
The coalition agreed to reverse some planned welfare cuts, including in parental allowance (Elterngeld), the housing benefit (Wohngeld) and state-funded child support (Unterhaltsvorschuss).
The alcohol tax is to be raised as planned from January, but the sparkling wine tax is not to rise.
Ahead of budget talks in the Bundestag, the government’s draft budget for 2027, proposed earlier this year, was worth €555.4 billion.
Germany has been striving to achieve an economic recovery after years of almost zero growth, but has been hampered by ongoing war-related energy shocks.
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