A project to end Switzerland’s controversial system of imputed rent was launched more than seven years ago. This week, discussions in Bern suggest the project’s chances of sucess remain narrow.
In Switzerland, anyone who owns a property retained as a primary or secondary residence must add a fictional rent to their taxable income, which is calculated based on the location and size of the property. The system was introduced during the second world war to fund budget shortfalls and has since remained.
Many homeowners come out ahead because mortgage interest and the costs of home maintenance are allowable tax deductions. However, those with small mortgages and new homes requiring little repair often end up paying more tax than they would without these fictional rents.
Both the upper and lower houses of Switzerland’s federal government agree on the removal of imputed rent. The sticking point is what should replace it. What deductions should remain? Should second homes be treated differently to primary residences? Should an alternative property tax be created to replace imputed rent?
This week, the Council of States, Switzerland’s upper house, said it does not agree with the National Council, the lower house, on key points, reported SRF.
The Council of States wants to abolish imputed rent only on primary residences, while the National Council would like to see it removed on secondary residences as well. The National Council proposes introducing a new property tax to replace lost tax revenue. This week, the Council of States said it was against removing imputed rent on secondary residences. Members from the mountain regions, where there is a high number of secondary residences, are resistant to change, fearing a loss of tax revenue if imputed rents on secondary residences are axed.
The Council of States also hold a different view to the National Council on mortgage interest deductions. It wants to put a cap on these if imputed rent rules are changed.
Another challenge to change is the public. Renter advocacy groups have said they will call a referendum on whatever is agreed by the government. In a nation where homeowners are a minority there is a good chance that any change that improves the lot of homeowners will be rejected by voters.
More on this:
SRF article (in German)
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