Germany hikes taxes on guilty pleasures to boost revenue

Germany is raising taxes on cigarettes, sugary ​drinks and alcohol in a push ​expected to generate billions of euros ‌for state ​coffers while promoting public health.

Lawmakers on Thursday approved a sharp increase in tobacco taxes, a measure expected to raise more than €12 billion ($13.5 billion) ‌between 2027 and 2030 and push the average price of a pack of cigarettes above €11 by the end of the decade. A day earlier, the cabinet approved a sugar tax on soft drinks from July ‌2027. Drinks containing at least five grams of sugar per 100 millilitres would be taxed ‌at €0.26 per litre, rising to €0.32 for products with higher sugar content.

The finance ministry expects the levy to raise €690 million in 2027 and €925 million in 2028. The revenue will help offset cuts to federal health insurance subsidies. The ministry estimates sugary ⁠drink consumption ​results in annual healthcare ⁠costs of about €2.1 billion.

Berlin also plans to raise duties on spirits, sparkling wine and alcopops by 20% from 2027, generating ⁠hundreds of millions of euros more while leaving beer and still wine untouched. Opposition parties criticised the tobacco tax ​increase as an additional burden on consumers and warned it could fuel the black market.

The measures, ⁠targeting products often seen as affordable indulgences rather than necessities, reflect a broader trend among governments using taxes on tobacco, ⁠alcohol ​and sugary drinks to steer consumer behaviour and raise revenue. Britain is tightening its sugar levy by lowering the threshold at which drinks become taxable and expanding its scope, while France has ⁠steadily increased tobacco taxes and aims to lift cigarette prices to about €13 a pack by 2027.

Among the ⁠German taxes set ⁠to rise is one of the country's oldest. The sparkling-wine duty, or Sektsteuer, was introduced in 1902 and has survived the fall of the empire, ‌two world ‌wars and successive governments. ($1 = 0.8891 euros)