German spirits body challenges tax hike plan
A trade body has criticised the German government’s proposal to increase alcohol duty, warning that it unfairly targets spirits and is based on unrealistic consumer assumptions.
Germany’s Federal Ministry of Finance intends to raise duty on spirits, sparkling wine (sekt and Champagne) and alcopops by 20% from 1 January 2027. Beer and other wines have not been targeted.
The Bundesverband der Deutschen Spirituosen-Industrie und -Importeure (BSI), otherwise known as the Germany Spirits Industry and Importers Association, has called for a ‘robust, transparent and comprehensible impact assessment and dialogue’ over the government’s plans.
The country’s finance ministry has estimated that the alcohol tax hike will generate an additional €385 million (US$440m) in revenue, but the BSI believes this assumption is based on the expectation that there will be no impact on sales volume or turnover.
The BSI has calculated that the net effect on government revenue will be ‘significantly reduced’ based on a price volume elasticity decrease, an annual market decline of 1% and a drop in value added tax (VAT).
The price elasticity for spirits in Germany was down by 1.9% for the first quarter of 2026, according to NIQ figures. BSI warns that the elasticity could increase in the short term, leading cash-strapped consumers to switch to cheaper products.
“Anyone justifying a tax increase as a contribution to budget stabilisation should also demonstrate that the expected additional revenue will actually materialise under realistic market conditions,” explained Angelika Wiesgen-Pick, managing director of the BSI.
“Consider, too, declining sales, avoidance reactions such as purchasing from abroad and illegal procurement, substitution with other alcoholic beverages, as well as effects on sales tax, trade tax, and employment. Consumers are particularly sensitive to price increases during periods of high inflation.
“At the same time, the industry has been experiencing average annual sales declines of approximately 1% for years. Why shouldn’t this trend continue despite rising prices?”
The BSI also highlights that the tax hike affects spirits the most, as the category accounts for almost 70% of Germany’s alcohol tax revenue. This is despite spirits only representing a 4.6% volume share of the country’s alcoholic drinks market (equal to 18-20% of pure alcohol consumed in Germany), the BSI said.
In comparison, beer accounts for 72.1% of Germany’s alcohol volume share and generates 18.1% of tax revenue. Wine (excluding sparkling) remains untaxed and accounts for 20.5% of the country’s alcohol volume.
As such, the BSI warns that a tax increase would ‘place an even greater strain on small- and medium-sized (SMEs) spirits producers’, and to a lesser extent, regional manufacturers, the retail and hospitality sectors, tourism and the entire value chain.
‘Revenue expectations must be reliable’
The trade body has also called out the government for its conflicting policy objectives.
“Public health considerations and fiscal justifications should not be conflated,” Wiesgen-Pick continued. “If a measure is justified by expected additional revenue, these revenue expectations must be reliable.
“One cannot assume significant declines in consumption from a public health perspective and then present increased revenue as guaranteed from a fiscal perspective. That is a contradiction in terms.
“Prevention remains the more effective instrument, as it addresses the root causes of problematic, abusive consumption. A blanket additional burden on the predominantly moderate-consumption adults (95% according to the NielsenIQ Consumption Patterns Study 2025) and medium-sized businesses is no substitute for targeted, evaluated prevention work – such as that carried out, for example, by the BSI’s ‘Working Group on Alcohol and Responsibility’.”
According to IWSR’s global consumption forecast, the number of alcohol servings consumed in Germany in 2035 is expected to be 14% less than in 2025. IWSR said alcohol servings consumed in Germany fell by 5% in 2025.
The BSI has urged lawmakers and the finance ministry to address five key issues before moving forward with the tax increase.
It asks whether projected net tax revenues remain achievable once realistic sales declines are factored in; what assumptions are used on price pass-through, price elasticity and the shift in consumption; the impact on SMEs, employment and regional value creation; the rationale for targeting spirits rather than other alcohol categories; and evidence that a spirits-specific tax increase would be more effective than prevention and education measures.
The association said it intends to commission legal and scientific reviews of the draft legislation and submit evidence during the parliamentary process.
A spokesperson for the Federal Ministry of Finance said: “One of the central tasks of this federal government is to consolidate the federal budget. The federal government has therefore decided to strengthen the revenue side. This includes, among other things, increasing taxes on alcohol (not on beer or wine). These measures are intended to take effect starting January 1, 2027.
“They serve not only the purpose of consolidating the budget but also health policy objectives. Federal finance minister Lars Klingbeil said yesterday during the presentation of the government’s draft budget for 2027: ‘What makes you sick will become more expensive’.
“The taxes on alcohol, sparkling wine, intermediate products, and alcopops (not wine or beer) are to be increased. The regulations will be part of the draft Jahressteuergesetz (Annual Tax Act).
“We are still coordinating the final details within the federal government. Therefore, we cannot comment further at this time.”
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