The Potential Sustainability Impact of a German Coffee Tax Exemption

In April 2018, Germany’s BMZ publicly called for exempting coffee companies (e.g. roasters) from specific taxes if their coffee has been sustainably-produced and fairly-traded.  How could a system be designed to ensure that this financial incentive can lead to sustainability impact for smallholder coffee farmers worldwide?

To address this complex question, GIZ is consulting stakeholders to discuss different options and asked Aidenvironment to provide expert input and propose a framework of sustainable production and fair trade components.

Aidenvironment outlined the key issues and components that need to be in place to enhance sustainable production and fair-trade in the coffee sector. We assessed existing initiatives in the coffee sector on their effectiveness and potential relevance for the tax exemption mechanism.  

We proposed a framework of key components: sustainable production and trade criteria + fair price + transparency and accountability elements. The components alone are impactful, efficient, and credible yet, taken together, strengthen the weaknesses of the other components reinforcing a strong system.

Our proposal was made recognizing the limitations of a tax exemption in channeling benefits through the supply chain at scale. In addition, we recommended alternative solutions like public-private investment as a holistic and coordinated approach to transform the coffee sector to higher levels of performance and resiliency.

Our advice is now part of the coffee stakeholder consultation underway in Germany.

Read the full report here.

For more information, please contact Jan Willem Molenaar or David Short.