«Tax on health contrary to the agreements»: the Hinny report is now public (cross-border guide)

Context

The opinion commissioned by Ticino to the professor of tax law of the University of Freiburg has been published in full. The conclusion: the Italian levy is an income tax and violates the Borderers Agreement

The appraisal can now be consulted in full. And it puts black and white the legal reasons on which Ticino based its opposition to the Italian "health tax" on old border workers. It was signed by Pascal Hinny, full professor of tax law at the University of Freiburg, who was instructed by the cantonal tax administration to verify the compatibility of the new levy with the Agreement on frontier workers and with the Convention against double taxation between Switzerland and Italy. The professor's answer is clear: from the Swiss point of view, the tax is a tax and its collection by Italy violates international agreements. The knot is the right of taxation on so-called old frontiersmen. For those who fall under the transitional regime provided for by the Agreement, the income from employee work produced in Switzerland can be taxed exclusively by the Confederation.

Operational details

Until 2033, the border cantons pay 40% of the tax at source to Italy, but this does not change the distribution of tax power: on those incomes Italy cannot apply further taxation. It is precisely on this point that the health tax is applied. The contribution provided by Italy also concerns old border workers who have opted for the Italian health system and is calculated on the net income earned working in Switzerland. The rate is progressive, from 3 to 6%, with a minimum of 30 and a maximum of 200 euros per month. The central part of the appraisal is dedicated precisely to the nature of the withdrawal. Hinny excludes that it can be considered the consideration of a health service. Paying the tax does not in fact entitle you to new coverage, does not extend existing coverage, and failure to pay does not result in loss of health care.

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Key points

Therefore, an individual consideration directly linked to the payment is missing: an element that distinguishes a causal tax from a tax. According to Hinny, the levy has the typical characteristics of the tax: it is commensurate with the income from work produced in Switzerland, is progressive and finances public purposes without attributing a specific benefit to the individual taxpayer in return. The resources can also be used for purposes other than individual health coverage. Hence the conclusion. The health tax is, both according to Swiss law and according to the interpretation of the Convention, a tax on income from work. And since for old frontier workers that income is reserved for Swiss tax authorities, Italy cannot unilaterally introduce a second levy on the same taxable amount. For Hinny, therefore, the tax is incompatible with the Agreement on frontier workers and with the Italy-Switzerland Convention against double taxation.

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