A compromise to fund the army

Context

In brief

• Finance Committee approves compromise to fund army
• Fund with maximum annual borrowing of 6 billion from 2027
• Funding: +VAT 0,2 percentage points, unspent appropriations 500M, 2026 surpluses

Key facts

• What: Finance Committee compromise for an army fund with borrowing capacity
• When: From 2027 (vote: Council of States in September, National Council in December 2026)
• Where: Swiss Federal Parliament
• Who: Council of States Finance Committee, chaired by Eva Herzog
• Max. borrowing: 6 billion per year
• Funding sources: VAT increase of +0,2 percentage points (800M), unspent appropriations (500M annually), 2026 surpluses (1 billion)

The Finance Committee of the Council of States approved a compromise to finance investments in the Swiss army. The decision taken by the Committee, chaired by Eva Herzog, provides for the creation of an ad hoc fund authorized to borrow up to a maximum of six billion per year starting in 2027.

"We tried to reach the classic compromise," Herzog explained. "Everyone made some concessions, without entrenching themselves around their red lines." The compromise follows the structure proposed by the Federal Council, but with specific details regarding funding.

The plan rests on three pillars. The first is one billion in surpluses expected in the 2026 budget. The second consists of unspent appropriations, estimated at 500 million per year. The third — and most controversial — is a 0,2-percentage-point increase in VAT, which should generate approximately 800 million per year.

However, there is an important constraint. If the VAT increase were to run into trouble in Parliament or be rejected in a possible popular vote, the fund would remain active anyway. In that case, it will be up to the two chambers to find alternative sources of funding. "In the worst-case scenario, namely if no source of revenue were to be found, views would diverge again," Herzog warned, between those who want to draw on the ordinary budget with savings plans and those who would prefer to borrow more.

Reactions and next steps

The decision was reached by a comfortable majority, but it was not unanimous. Benjamin Mühlemann, a member of the Council of States from PLR/GL, criticizes the financing arrangements because "by using part of the unspent appropriations, we delay repayment of the covid loans" and, with higher VAT, "we take money away from citizens." Benedikt Würth (Centro/SG) takes a different view, judging the agreement to be "significant progress from a security policy perspective", financially sustainable and constitutional.

The dossier now goes to the chambers. The Council of States will vote in September, and the National Council in December. If the proposal survives the votes, the army will finally be able to bring forward payments for new investments in an increasingly tense international context.

Operational details

The increase in VAT by 0,2 percentage points is at the heart of the controversy. Today in Switzerland, the standard rate is 8,1%, the reduced rate is 2,5% (foodstuffs, books, medicines), and the special rate is 3,8% (restaurants). An increase of 0,2 percentage points would bring the standard rate to 8,3%.

Impact on consumption

What does this mean in practice? Every purchase subject to standard VAT will cost slightly more. The exact impact depends on your annual spending and the mix of goods purchased. You can use calcolatore del costo della vita to accurately estimate how the VAT increase will affect your household budget.

The government and the Commission estimate that this increase will generate 800 million per year for the army fund. If approved, the increase will enter into force by 2027, in sync with the start of the fund's operations. This means that those who purchase today can still benefit from the current rate, but consumer prices will undergo a gradual increase once the new rate enters into force.

The "absence of VAT" scenario

If the VAT increase did not pass — in Parliament or in a possible popular vote — the fund would nevertheless remain operational, but the two Chambers would have to immediately find funding. The options are:

• Draw on the ordinary budget with savings plans in other sectors (healthcare, education, public transport)
• Increase federal borrowing above what was planned
• Resort to additional taxes (e.g. new federal tax)

Herzog warned that "opinions will diverge again" if the VAT increase fails. This means that the current compromise will lose its cohesion. Progressive cantons will want savings in services, while more conservative ones will prefer to borrow. The deadlock could paralyze army funding precisely when the geopolitical situation makes it urgent.

Remaining credits and COVID reimbursements

One element that has drawn criticism is the use of remaining credits (500 million annually) to fund the fund. These are funds allocated by Parliament for specific projects that were never fully spent. Mühlemann stressed that using them for the army "delays the repayment of covid credits" — that is, the money the federal government disbursed during the pandemic.

The issue is more technical than dramatic, but it signals a priority in the federal budget: military investments now take precedence over repaying emergency spending. This is an explicit political choice: security takes precedence over "cleaning up the pandemic accounts."

Useful tools for your case

To practically check your scenario within/beyond 20 km, use calcolatore stipendio netto and guida dichiarazione redditi.

Key points

The parliamentary process is already set. The Council of States will vote in September 2026. If it passes, the dossier will go to the National Council in December. If it passes both chambers, the law will enter into force—with a likely optional referendum that could get in the way.

Official timeline and risks

• September 2026: Vote in the Council of States
• December 2026: Vote in the National Council
• 2027: Fund enters into force (if confirmed)
• If applicable, 2027-2028: Popular referendum if 50,000 signatures are collected

The time frame is tight. The army has expressed the urgency of bringing investments forward before global prices rise further. If Parliament passes the measure but the people vote no in a referendum, the fund would be dissolved and the process would start over from scratch with new financing.

What citizens and businesses need to do

Citizens residing in Switzerland have no immediate action to take. However:

If VAT increases, it would be advisable to bring forward purchases of durable goods (cars, furniture, large household appliances) before 2027, to avoid the additional tax burden. Those who work in Switzerland and track deductible expenses (self-employed people, SMEs) will have to recalculate their fixed-cost structure.

If the referendum blocks the plan, the government will have to return to Parliament with a new bill, probably by 2027-2028. In this case, military investments will face further delays.

To monitor developments and understand the precise impact of VAT on your purchases, you can use calcolatore delle imposte on our website, which updates federal VAT rates. You can also consult calcolatore del costo della vita to estimate how a VAT increase would affect your annual spending.

Where to find official information

Parliamentary votes and official results will be published on the website of the Federal Parliament (parlament.ch) and the Federal Chancellery (admin.ch). The full text of the law will be available in public legislative portals.

The Finance Committee's decision represents a significant step toward financing the Swiss army, but Switzerland's democratic process—Parliament + a possible referendum—will ensure that the final say remains with the citizens.

Source: rsi.ch