This week, Switzerland’s lower house has narrowly backed a temporary VAT rise to finance the country’s new 13th month of state pension, reported SRF. Wage contributions are off the table and the National Council, Switzerland’s parliament, agreed only to lift VAT by 0.7 percentage points until the end of 2030.
That vote puts an end to a centre-left plan, passed earlier in the Council of States, which coupled higher VAT with increased salary tax and linked pension funding to the abolition of the marriage tax penalty – married couples are currently taxed on combined income. However, the National Council rejected combining these two issues.
The debate was tightly contested. At first, the liberals (PLR/FDP), right-wing UDC/SVP and the centrist Green Liberals swung behind the stopgap measure. In the final tally, the PLR/FDP and UDC/SVP turned against it, leaving the Socialists, Greens and the Centre Party—previously opposed—to secure its passage.
Elisabeth Baume-Schneider, the Socialist Party cabinet minister for social affairs, favoured a permanent fix but will take what she can get. The chamber also sent her a message: by the 2030s the government must attempt a more sweeping reform, including another look at the retirement age.
Finance Minister Karin Keller-Sutter had less reason to cheer. Like the Council of States, the National Council refused to cut the federal contribution to the pension fund, saddling the federal budget with an extra CHF 400 million. At a time of belt-tightening, that money must be found elsewhere.
The wrangling is not over. The Council of States will return to the question in the winter session. A conciliation committee may be needed if the two chambers cannot agree, and the extra funding could yet collapse. Should a deal survive, voters will have the final say. Because a VAT rise requires a constitutional change, a referendum is obligatory. The electorate overwhelmingly endorsed the 13th pension itself; they will soon be asked to decide how to pay for it.
A 0.7 percentage point VAT hike would bring the rate to 8.8%, up from 8.1%. It is not clear how much the lower rate, currently 2.6%, would be increased. Last time both rates were raised proportionally.
More on this:
SRF article (in German)
For more stories like this on Switzerland follow us on Facebook and Twitter.
