VAT increase: UBS study highlights greater impact on low-income households

Context

TL;DR

• UBS: VAT weighs more heavily on low-income households
• From January 1, 2028: 8,1% would rise to 8,5%
• The popular vote is scheduled for November 29
• Second quintile: 3,4% of saving capacity

Key facts

• Who → UBS
• Measure → VAT increase for the 13th AVS pension
• Vote → November 29
• First payment → December 2026
• Proposed effective date → January 1, 2028
• Standard rate → from 8,1% to 8,5%
• Special rate → from 3,8% to 4%
• Reduced rate → 2,6% unchanged

The proposal put to the vote

In Zurich, on November 6, 2026, a UBS analysis examined the proposed increase in value added tax (VAT) to partially fund the 13th AVS/AHV pension. The measure will be put to a popular vote on November 29. According to the study, the increase would affect all Swiss households, but lower-income families would be more severely affected.

The most exposed aspect identified by the analysis is the ability of the most economically vulnerable households to save. The study is based on data from the Federal Statistical Office (UST/BFS) and links VAT to available resources and the ability to set money aside.

The proposal timeline

The introduction of the 13th AVS pension was approved by Swiss voters in March 2024. The benefit will be paid for the first time in December 2026. To cover part of its costs, the Confederation proposes increasing VAT.

If the federal decree were to receive the double majority of the people and the cantons, from January 1, 2028, the standard rate would increase from 8,1% to 8,5%. The special rate would rise from 3,8% to 4%, while the reduced rate would remain unchanged at 2,6%.

The timeline distinguishes three stages: the approval of the 13th pension, which has already taken place; the first payment in December 2026; and the possible change to the rates from January 1, 2028. The source explicitly refers to partial funding of the pension.

The subject of the analysis

The report considers not only the additional expenditure, but also its impact on households' economic situation. For the most vulnerable households, the effect could manifest itself primarily in a reduction in the margin available for saving. Households with greater financial resources, on the other hand, might continue to set money aside, albeit potentially to a lesser extent.

This is the main link between the increase in VAT and households' financial lives: the proposal is assessed not only by the amount of the tax, but also by the share of resources that would remain available after expenses and by the ability to set money aside.

Operational details

The comparison between income and savings

The analysis presents two distinct comparisons. The first uses the current rates and measures the VAT paid over a year relative to disposable income. The second considers the additional expenditure associated with the proposed increase and expresses it as a share of saving capacity. The two measures therefore refer to explicitly different bases in the source: on the one hand, disposable income; on the other, the amount a household is able to set aside.

For a single person under 65 with an annual gross income of 50'000 francs, the VAT paid at the current rates amounts to approximately 1'404 francs per year. The expenditure is equivalent to 3,9% of disposable income. For a person with an annual gross income of 150'000 francs, VAT rises to 2'746 francs, but its share falls to 2,8%.

The comparison shows the regressive nature of VAT described by UBS. In absolute terms, the person with the higher income pays more. Relative to available resources, however, the share is lower: the change from 3,9% to 2,8% is the figure used by the study to highlight the difference in proportional incidence.

The burden on saving capacity

To measure the effect of the proposed increase, the source relates the additional expenditure to saving capacity. For a single person under 65 belonging to the second-lowest income quintile, the burden would account for approximately 3,4% of that capacity; for the same type of household in the highest income bracket, the share would be 0,4%.

The figure is particularly significant for lower-income households, which often already cannot save or face considerable difficulty doing so. The report warns that the increase could further squeeze their financial margins, leaving them to choose between lower saving capacity and reduced consumption.

According to the source, the average impact on household budgets would be comparable to a 1,7% increase in compulsory health insurance premiums, namely LAMal/KVG. The figure is merely a reference and does not announce an actual increase in premiums. As for the cost of living, the estimate therefore remains limited to the effects on household budgets, VAT, and saving capacity.

Key points

The 13th AVS and the financing limits

A possible paradox emerges in the UBS report: the 13th pension will support some pensioners with limited resources, but they will have to face a higher VAT burden in relation to their financial situation. The new benefit is therefore not presented as a solution to all the economic problems of pensioners; the title of the section dedicated to the measure makes it clear that the 13th AVS will not solve every difficulty.

The tension arises from the fact that the proposed financing would be distributed through VAT, a tax which according to the analysis weighs proportionately more on low incomes. The same group of people could therefore receive support from the annuity and face, in the same financial framework, a higher VAT burden compared to their resources.

The alternative of wage contributions

Among the options evaluated in Parliament also includes the increase in wage contributions. According to BAK Economics estimates, increasing the standard VAT rate by one percentage point, while also proportionally adjusting the other rates, would generate resources equal to those of an increase of approximately 0.75 points in salary contributions.

The reference to BAK Economics serves to compare two financing methods: the increase in VAT and the increase in wage contributions. The source presents this hypothesis as one of the alternatives discussed in Parliament and does not state that it has been chosen.

A yes would not close the file

A favorable outcome of the vote may therefore not be enough: according to the study, to finance the 13th pension and guarantee the stability of the AVS, further measures will most likely be necessary. Insurance finances also remain under pressure due to demographic changes.

The outcome of the vote would therefore concern VAT rates, but the report places the decision within a broader financial question. To come into force, the proposal would have to obtain a double majority of the people and the cantons; only in that case, from 1 January 2028, would the steps indicated for the normal, special and reduced rates come into force.

The available figures allow the incidence of the tax to be compared, but not to attribute an identical additional amount to each household. The analysis reports annual VAT amounts at current rates for two income levels and, for the proposed increase, percentages referring to saving capacity and family budgets. For the institutional framework of social security, the [AVS 2026 synoptic table] is available (https://www.ahv-iv.ch/p/2.01.i).

Source: tio.ch