Germany waters down tax on sweet drinks, exempts small producers

BERLIN, Oct 14 (Reuters) — The German government on Wednesday diluted a planned sugary-drink tax and proposed exemptions for small manufacturers, easing a coalition dispute that had held up the bill. Under the new proposal, which the cabinet passed on Wednesday and will submit to parliament, there will be two tax brackets instead of the three previously planned. The tax is due to take effect on July 1, 2027, as the government aims to rein ​in rising rates of obesity to ease pressure on the health ​system. Beverages containing between 5 grams and less than 8 grams of sugar per 100 millilitres will be taxed at €0.26 per litre. Those containing 8 grams or more will be taxed at €0.32 per litre, the equivalent of $1.36 per US gallon. An earlier version had called for €0.26 for 5 grams or more, €0.32 for 7 grams or more and €0.38 for 10 grams or more. Independent manufacturers with an annual output of up to 1 million litres are to be fully exempt from the tax. This requires approval from the European Commission under state aid rules. Tax revenue in 2031 is expected to come in at €890 million instead of €1.16 billion previously estimated. ($1 = €0.8933) (Reporting by María Martínez and Ho