Swiss social affairs minister Elisabeth Baume-Schneider has defended a proposed increase in value-added tax (VAT) to help finance the 13th annual pension payment. Voters will decide on the measure in a referendum on November 29th.
“A ‘no’ would have serious consequences,” Ms Baume-Schneider warned at a press conference in Bern, reported RTS. Without additional revenue, she argued, Switzerland’s state pension system would face growing financial difficulties.
According to government estimates, rejecting the proposal would leave the pension fund with an annual deficit of almost CHF 5bn ($6.3bn) by 2035. Raising VAT would reduce the shortfall to around CHF 3bn.
Reserves are already at risk of falling below the statutory minimum of one year’s expenditure in 2027. By 2035 they would cover only 50% of annual spending without the tax increase, compared with 70% if the measure is approved.
A socially acceptable compromise
The referendum will take place shortly before the first 13th pension payment in December. The additional payment will cost CHF 4.2bn, of which CHF 1.4bn would be financed by higher VAT. This coming December around 2.5m people will receive the extra payment.
Ms Baume-Schneider described Parliament’s proposal as a moderate and socially acceptable compromise. It would raise the standard VAT rate from 8.1% to 8.5% and the special rate for hotels from 3.8% to 4%. The reduced rate on essential goods, including food and medicines, would remain unchanged at 2.6%. There is no VAT on health insurance premiums.
Keeping the reduced rate unchanged would help shield lower-income households from the additional tax burden, she argued.
Ms Baume-Schneider also stressed that all revenue raised by the VAT increase would go directly towards financing social security. She ruled out any restructuring of her department.
Asked whether raising the retirement age might help balance the books, Ms Baume-Schneider noted that the change would need the approval of parliament and voters. The pension system, she argued, needs more money now.
Opposition to the proposal
The Federal Council and Parliament argue that the measure would spread the cost of financing pensions across generations. But the proposal faces opposition from a parliamentary minority, which warns that higher VAT would erode purchasing power. Opponents favour structural reforms, including an increase in the retirement age.
The Free Democratic Party (PLR/FDP) launched its campaign against the proposal in late September. It argues that higher VAT would put additional pressure on households and small and medium-sized businesses, and advocates spending cuts instead.
Ms Baume-Schneider nevertheless expressed confidence that voters would back the measure. Her aim, she added, was to leave future generations with a financially sound social-security system.
Elisabeth Baume-Schneider has performed a remarkable U-turn on Swiss pension policy. Before joining the government, she supported the Socialist Party’s campaign for a 13th annual state-pension payment. Once in office as the minister responsible for pensions, she campaigned against the proposal, citing concerns about its cost.
Now she finds herself in the awkward position of defending the additional payment and advocating higher taxes to finance a policy she once championed but later opposed. The fiscal realities of governing—and the verdict of voters—have a way of testing political convictions.
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