Germany proposes a 20% tax increase on spirits and sparkling wine in 2027

Germany is moving ahead with higher taxes on alcohol and tobacco and is also preparing a new levy on sugary drinks, but the measures are at different stages and some parts of the package face legal and political challenges.

A draft budget law submitted by the federal government to the Bundestag on Sept. 7 would raise taxes by 20% on spirits, sparkling wine, intermediate products and alcopops as part of the 2027 budget package. The Cabinet had already approved the bill in July, and the first reading in parliament took place on Sept. 8. Beer would not be included in the increase.

The government says the alcohol tax changes are meant to help consolidate the federal budget. It projects additional revenue of €380 million in 2027 and €455 million a year from 2028 through 2031.

Under the proposal, the tax on spirits would rise from €13.03 to €15.64 per liter of pure alcohol. According to the tax analysis cited by AUTOHAUS, that would widen the gap between the tax burden on spirits and beer, shifting the ratio from 6.6 to 1 to 7.9 to 1.

That point has become central to the criticism. The Federal Association of the German Spirits Industry and Importers has raised constitutional and European law concerns, arguing that the increase could violate the constitutional principle of equal treatment if the government cannot show an objective reason for widening the difference between the taxation of spirits and beer. The association does not object to the existence of different tax regimes for different alcohol categories as such, but it questions whether the planned increase is legally justified when the stated purpose is primarily to raise revenue.

The same group has also challenged the government’s revenue forecast. It argues that higher prices could reduce sales and push consumers toward cheaper alcoholic drinks, which would weaken the expected tax take. Critics have also pointed to what they see as a contradiction in the government’s position: on one hand, officials cite declining alcohol consumption, while on the other they expect secure additional revenue from a higher spirits tax.

For the beverage industry, the alcohol proposal could matter well beyond tax administration. If approved in its current form, it could change shelf prices, squeeze margins and shift competition between drinks categories in one of Europe’s largest consumer markets. The decision to leave beer out of the increase, while raising taxes on spirits, sparkling wine and related products, could also alter the relative price balance faced by producers, importers, wholesalers and retailers.

The tobacco side of the tax package is further along. Germany has already adopted a law amending the tobacco tax system, with increases scheduled in four steps on Jan. 1 of 2027, 2028, 2029 and 2030. The Finance Committee approved an amended version of the bill on Oct. 14, and the Bundestag passed it on Oct. 15. It was published in the Federal Law Gazette on Oct. 20.

The government says the tobacco tax changes are intended to update the taxation of tobacco products and other smoking and vaping products while also protecting public health. It expects extra revenue of €1.507 billion in 2027, €2.437 billion in 2028, €3.419 billion in 2029 and €4.461 billion in 2030. The amended law raises the expected intake above the original government draft. Officials have said the gradual structure is meant in part to reduce the risk that consumers buy more tobacco abroad or turn to the black market.

For cigars, cigarillos, pipe tobacco and water-pipe tobacco, the new rates are scheduled to start on March 1, 2027.

But the tobacco law has also run into a procedural problem. Because the law entered into force the day after publication, it has technically been in force since Oct. 21. The Federal Finance Ministry has described that outcome as an error and says the higher tax rates are intended to apply only from 2027. German customs authorities, which collect the tax, have also referred to the issue as an obvious mistake and say the old rates should continue to apply through Dec. 31, 2026.

The ministry has said it has already started a correction process. It has not said whether a correction in the Federal Law Gazette will be enough or whether another legislative process will be needed. The issue also affects vaping liquids. The new law sets tax rates for those products starting only in 2027, and because the old version was replaced, the 2026 rate is no longer clearly stated in the text. The ministry says the old rate should still apply this year.

Trade groups have criticized the tobacco increases on economic as well as legal grounds. Some warn that higher prices could encourage black-market purchases or cross-border smuggling, undermining both public health aims and tax collection. Others say the changes could hit small and midsize specialty retailers especially hard. There are also doubts about the government’s revenue projections if legal sales fall or if more consumers turn to foreign or illicit supply. An EU Commission proposal to raise the bloc’s minimum tobacco tax could eventually limit cheaper cross-border buying, but no such measure has yet been adopted.

The government is also preparing a separate tax on sugary drinks, though that measure is still at an earlier stage. On Oct. 14, the Cabinet approved a regulatory proposal that coalition lawmakers can use to draft legislation. No law has been passed yet.

Under the Cabinet plan, the sugar tax would start on July 1, 2027. Drinks with at least 5 grams of sugar per 100 milliliters would be taxed at €0.26 per liter. For drinks with at least 8 grams per 100 milliliters, the rate would rise to €0.32 per liter.

The proposal would mainly affect soft drinks, iced tea, energy drinks, fruit nectar and juice concentrates with added sugar, as well as sugary concentrates used to prepare beverages. Alcoholic drinks would be exempt, as would several other categories, including certain alcohol-free alternatives, milk-based drinks, oat and rice drinks, mixed drinks, pure fruit and vegetable juices, and beverages made with sweeteners instead of sugar.

The tax would fall on manufacturers and wholesalers. The proposal includes exemptions for smaller producers, and the government has said relief should apply to very small operations. Its revenue estimate points to €690 million in 2027, €925 million in 2028 and roughly €875 million to €890 million a year after that. The government says the measure is intended both to reduce sugar consumption and to help stabilize statutory health insurance finances.

The sugar tax remains highly contested. A similar plan was reportedly halted by the Chancellery in early October before the Cabinet backed the current proposal. Agriculture and consumer protection ministers from the conservative bloc have opposed it in a letter to the chancellor, and the beverage industry has also argued that an additional levy is not necessary to protect public health.