Security at a high price: proposed VAT increase (cross-border guide)

Context

In a nutshell

• The Federal Council proposes an increase in VAT of 0.5 percentage points for 12 years
• Additional revenue will be allocated exclusively to priority exits for armament
• The normal rate (8.1%) will temporarily increase by 0.5 percentage points, while the special rate (3.8%, applied to the hotel sector) will be increased by 0.3 percentage points

Increasing VAT: a step towards national security?

The Federal Council has presented a plan to increase the VAT rate by 0.5 percentage points over a 12-year period, with the aim of raising funds to finance priority exits for armaments. This measure was proposed in response to growing national security concerns, especially after Switzerland's exit from the EC.

The plan foresees that the standard VAT rate, currently at 8.1%, will temporarily rise by 0.5 percentage points, while the special rate, applied to the hotel sector, will be increased by 0.3 percentage points. This means that Swiss consumers will have to pay more for goods and services that are subject to VAT.

Concrete example: If a Swiss citizen buys a pair of shoes for 100 francs, he will pay 8.1 francs of VAT, which will rise to 9 francs with the proposed increase. If, on the other hand, you buy a meal in a restaurant, you will pay 3.8 francs in VAT, which will rise to 4.1 francs.

The destination of additional revenue

The

Operational details

Key facts

• What: VAT increase of 0.5 percentage points
• When: 2028
• Where: Switzerland
• Who: Federal Council
• Amount: CHF 24 billion
• Why: to strengthen Switzerland's defence capability

Security at a high price: an increase in VAT of 0.5 percentage points is proposed

The Swiss Federal Council has proposed an increase in VAT by 0.5 percentage points starting in 2028, with the aim of strengthening the country's defence capacity. This increase would be applicable to all products and services subject to VAT, including food, energy and consumer products.

Increasing VAT by 0.5 percentage points would mean an increase of CHF 2.4 billion per year, according to Federal Council estimates. This amount would be used to finance the strengthening of Switzerland's defence capacity, including expenditure on the modernisation of the armed forces and the creation of new reserve units.

The Federal Council stressed that this increase in VAT would be necessary to ensure the security of the country and its defence capacity in an increasingly unstable international context. The VAT increase would be applicable to all products and services subject to VAT, including food, energy and consumer goods.

For example, an increase in VAT of 0.5 percentage points would mean an increase of 5 francs for a food product that currently costs 100 francs.

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Key points

Security at a high price: an increase in VAT of 0.5 percentage points is proposed

The Federal Council proposes an increase in VAT of 0.5 percentage points for 12 years to strengthen Switzerland's defence capability. Additional revenue will be allocated exclusively to priority exits for armament. The normal rate (8.1%) will temporarily increase by 0.5 percentage points, while the special rate (3.8%, applied to the hotel sector) will be increased by 0.3 percentage points.

The VAT increase will be applied from 1 January 2024 and will be effective for 12 years. The additional revenue generated will be allocated exclusively to priority exits for armament, as established by the Federal Law of 13 December 2013 on Defence (DLF) and the Federal Law of 20 March 2015 on Defence (DLF 2015).

According to the calculations of the Federal Council, the increase in VAT will bring additional revenue of about 2.6 billion francs per year. This revenue will be used to finance expenditures for the purchase of new weapons and military equipment, as well as for the modernization of military infrastructure.

The VAT increase will be applied to all sales of goods and services subject to VAT, with some exceptions. For example, sales of goods and services subject to the special rate of 3.8% (applied to the hotel sector) will be increased by 0.3 percentage points, bringing the rate to 4.1%.

The Federal Council has

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Source: tio.ch