What exactly does the Finance Committee propose?

The Finance Commission of the Council of States proposes to establish a dedicated Swiss Army Investment Fund. The fund will be allowed to borrow up to a maximum of CHF 6 billion per year from 2027. This allows the military apparatus to anticipate important payments in an increasingly competitive arms market, without compromising the regular budget of the Federal Government.

How is the fund financed?

There are three sources of funding. First, the one billion surplus of the 2026 federal budget. Second, credit residuals from the ordinary financial statements equal to CHF 500 million per year. Third, an increase in VAT of 0.2 percentage points, which would be worth another 800 million per year. If the VAT increase does not pass through Parliament or a popular vote, Parliament must find funding alternatives.

When does the vote take place?

The Council of States votes in September 2026. The National Council votes in December 2026. If both Houses approve, the fund will become operational from 1 January 2027. The VAT increase could still be subject to a popular referendum under the rules of Swiss direct democracy.

What happens if the VAT increase is not approved?

The fund remains active anyway. However, the Federal Chambers must find alternative sources of funding. Two options: draw on the regular budget with cuts in other sectors (health, research, transport), or increase the federal state's debt. Neither choice is painless, as both have implications for the public budget and social policies.

Are there any criticisms of compromise?

Yes. Benjamin Mühlemann (PLR/Glarus) argues that delaying the repayment of Covid credits and increasing VAT takes resources away from Swiss citizens. Benedikt Würth (Centre/St Gallen), on the other hand, considers the compromise as "significant progress" for federal security policy, financially sustainable and in accordance with the Constitution.

Army, the compromise on financing (cross-border guide)

Di Marco Ferrari · Published on 25 August 2026

Swiss Federal Parliament building in Bern, venue for defense fund vote

The Finance Commission proposes a fund with debt of up to 6 billion per year from 2027. Financing: VAT +0.2%, credit residuals and surpluses 2026. Voting in September and December 2026.

Context

In a nutshell

Army fund: debt up to 6 billion per year from 2027
Financing: VAT +0.2%, credit residuals 500M, surpluses 2026
Vote: States September, National December 2026
If VAT fails, Parliament looks for alternatives

Key facts

What: Defence investment fund with the ability to borrow independently
When: From 2027 (vote September-December 2026)
Where: Finance Commission Council of States, then Federal Parliament
Who: Eva Herzog (Chairman), Mühlemann (PLR/GL), Würth (Centre/SG)
Amount: 6 billion of maximum annual debt

The Finance Commission of the Council of States has reached a compromise on the army's request for additional funds at short notice. The dossier now goes to the Federal Parliament for the final vote and represents a significant step forward in the Swiss defence debate.

The solution envisioned by the Government remains that of an ad hoc fund for the army, authorized to borrow to advance military investments without binding it to ordinary federal budget cycles. The maximum limit: 6 billion francs per year from 2027.

"We tried to reach the classic compromise," explained the chairman of the committee, Eva Herzog. "Everyone has made some concessions, without clinging to their own red lines."

The three pillars of funding

Fund funding is based on three distinct components. In

Operational details

The impact on the citizens' portfolio

The 0.2% VAT increase represents the main pillar of the loan and will have a concrete effect on daily consumption. In practical terms, it means that every franc spent on goods and services subject to VAT will have a marginally higher cost. For an average Swiss family with annual consumer spending, we talk about small amounts per single purchase, but the effect accumulates over time and affects the overall cost of living.

VAT in Switzerland includes three rates: 8.1% (standard), 2.5% (essential goods such as food), 3.7% (hospitality and catering). The 0.2 point increase would affect all rates, unless Parliament decides otherwise for individual sectors. To simulate the real impact on your personal situation, puoi usare un calcolatore del costo della vita in Svizzera.

Scenario: If VAT fails in the vote

If the VAT increase were to collapse in Parliament or be rejected by a popular vote, the fund would still remain established, but the executive and the Chambers would have to look for funding alternatives. Two roads remain open: tap into the regular federal budget with cuts and savings in other areas such as health, research and transport, or further increase the federal state's indebtedness to cover the fund. No option is painless.

The first scenario would reduce funding for other critical public policies. The second would add additional public debt to the budgets

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Key points

How to follow the parliamentary voting process

The next crucial step is the vote in the Council of States scheduled for September 2026. You will be able to follow the debate through the official channels of the Federal Chancellery (parlament.ch) and the websites of individual cantons, since the Council of States members directly represent regional areas. The National Council vote will take place in December 2026. Only after the approval of both chambers can the project proceed toward entry into force on January 1, 2027.

If it passes, inevitably a phase of political opposition will follow, and a popular referendum on the VAT increase could be requested. Since the issue touches federal taxation for all Swiss citizens, the democratic process could extend beyond 2027.

The impact on defense operational capacity

If the compromise passes, the Swiss military will be able to advance important payments in an increasingly tense and competitive arms market. The ability to borrow up to 6 billion annually allows the military apparatus to plan purchases and modernizations over multi-year horizons, avoiding delays related to ordinary budget cycles that characterize traditional federal financing.

Calculate the real impact on your tax situation

Understanding how the VAT increase could concretely affect your annual budget requires estimating your average spending on VAT-subject consumption. A cost of living calculator for Switzerland allows you to assess the real impact of tax variations on different personal consumption scenarios.

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Frequently Asked Questions

What exactly does the Finance Committee propose?: The Finance Commission of the Council of States proposes to establish a dedicated Swiss Army Investment Fund. The fund will be allowed to borrow up to a maximum of CHF 6 billion per year from 2027. This allows the military apparatus to anticipate important payments in an increasingly competitive arms market, without compromising the regular budget of the Federal Government.
How is the fund financed?: There are three sources of funding. First, the one billion surplus of the 2026 federal budget. Second, credit residuals from the ordinary financial statements equal to CHF 500 million per year. Third, an increase in VAT of 0.2 percentage points, which would be worth another 800 million per year. If the VAT increase does not pass through Parliament or a popular vote, Parliament must find funding alternatives.
When does the vote take place?: The Council of States votes in September 2026. The National Council votes in December 2026. If both Houses approve, the fund will become operational from 1 January 2027. The VAT increase could still be subject to a popular referendum under the rules of Swiss direct democracy.
What happens if the VAT increase is not approved?: The fund remains active anyway. However, the Federal Chambers must find alternative sources of funding. Two options: draw on the regular budget with cuts in other sectors (health, research, transport), or increase the federal state's debt. Neither choice is painless, as both have implications for the public budget and social policies.
Are there any criticisms of compromise?: Yes. Benjamin Mühlemann (PLR/Glarus) argues that delaying the repayment of Covid credits and increasing VAT takes resources away from Swiss citizens. Benedikt Würth (Centre/St Gallen), on the other hand, considers the compromise as "significant progress" for federal security policy, financially sustainable and in accordance with the Constitution.