The Swiss Parliament struggles to find agreement on important issues

Context

In brief

• Swiss Parliament deadlocked over AVS and EU agreements
• Funding the 13th AVS pension: partial solution with VAT increase
• Double majority for Bilateral Agreements III: discussion remains open
• Nuclear power: Parliament backs the government's counterproposal

Key facts

• Funding of the 13th AVS pension
• Summer session 2026, Federal Palace, Bern
• Federal chambers involved
• Requirement: 4-5 billion francs annually

The summer session of the Swiss Parliament, which concluded in Bern, saw little progress on crucial issues such as funding the 13th AVS pension and the agreements with the EU. Among the most discussed dossiers, funding for the 13th AVS old-age pension saw a partial solution, with a 0,4% increase in VAT covering only just over one billion of the 4-5 billion needed.

AVS funding

The annual requirement for the 13th AVS pension amounts to 4-5 billion francs. The solution found by the federal chambers provides for a 0,4% increase in VAT, generating approximately 1,1 billion francs. This means that AVS will have to draw on its reserves for the next two years, increasing concerns about the future of the Swiss pension system. AVS reserves, currently amounting to approximately 40 billion francs, could fall to 36 billion by 2028.

Operational checklist for AVS funding:

• 0,4% VAT increase (1,1 billion francs)
• Use of AVS reserves (up to 4 billion francs by 2028)
• Possible introduction of new funding measures by 2026

Bilateral Agreements III

The question of whether approval of the new agreements between Switzerland and the European Union, the so-called 'Bilateral Agreements III', requires a double majority of the people and the cantons remains open. The discussion is complex and controversial, with conservative and Eurosceptic cantons potentially having greater weight in the event of a double majority. For example, cantons such as Ticino, Central Switzerland and parts of Valais have expressed significant reservations.

Comparisons between practical scenarios:

• Scenario 1: Simple majority - Approved with 50%+1 of the popular vote
• Scenario 2: Double majority - Requires both the popular and cantonal majority (at least 12 cantons out of 26)

📊 Recent electoral data:

• 2023 federal elections: Eurosceptic parties obtained 40% of the vote
• Cantons with Eurosceptic majorities: Ticino (55%), Uri (52%), Appenzell Innerrhoden (50%)

Nuclear power

Parliament supported the government's counterproposal on nuclear power, which provides for a phase-out plan by 2035. This includes the closure of the Beznau I and II, Mühleberg (already closed in 2019), Gösgen and Leibstadt nuclear power plants.

💡 Regulations and key dates:

• Nuclear Energy Act: 2021 revision
• Phase-out plan: gradual closure by 2035
• Investments in renewable energy: 2 billion francs annually until 2030

⚠️ Concerns and challenges:

• Energy security during the transition
• Economic impact on cantons with nuclear power plants
• Need for renewable energy infrastructure

"The summer session showed Parliament's difficulties in finding shared solutions on issues crucial to Switzerland's future."

Operational details

Analysis of parliamentary decisions

Impact on purchasing power

The decision to increase VAT to partially finance the 13th AVS pension payment will have a direct impact on the purchasing power of Swiss citizens. With a VAT increase of 0,4%, the prices of goods and services will rise, reducing the purchasing power of Swiss households. For example, a household with an average income of 8.000 CHF per month in Zurich could see an annual increase in spending of approximately 200 CHF, considering a basket of taxed goods and services.

Future of AVS

The minimum solution found to finance the 13th AVS pension payment increases pressure for a comprehensive reform of the pension system. The AVS 21 reform, which entered into force on January 1, 2024, has already introduced a gradual increase in the retirement age for women to 65. However, given the current insufficient funding, there will likely soon be a new debate on raising the retirement age, with possible repercussions for future federal elections. Cantons such as Geneva and Vaud, with an older population, could be particularly affected by such changes.

Agreements with the EU

The issue of the double majority for Bilaterals III is crucial for future relations between Switzerland and the European Union. If the double majority were to be approved, conservative cantons such as Schwyz or Uri, which are skeptical of Europe, would have greater weight, making approval of the agreements with Brussels more difficult. This could directly affect key sectors such as machinery and pharmaceutical exports, which are crucial for cities such as Basel and Zurich.

Future scenarios

Scenario 1: AVS reform

If the Swiss Parliament decides to proceed with a comprehensive reform of AVS, it may be necessary to increase payroll contributions or raise the retirement age. For example, a 0,5% increase in payroll contributions could cost a worker with a salary of 6.000 CHF approximately 30 CHF more per month. This scenario would entail intense political debate and could have repercussions for the 2027 federal elections.

📊 Operational checklist for AVS reform:

• Assessment of the financial impact on families and businesses
• Consultation with the cantons and major cities
• Analysis of possible electoral repercussions

Scenario 2: Referendum on VAT

The Swiss population will probably have to vote on the VAT increase decided by Parliament as early as November. This referendum will be crucial for the future financing of AVS and for the purchasing power of Swiss citizens. For example, a VAT increase could lead to a 0,4% increase in consumer goods prices, directly affecting the budgets of Swiss households.

💡 Comparison of practical scenarios:

• Scenario with VAT increase: Immediate price increase, direct impact on purchasing power
• Scenario with AVS reform: Increase in payroll contributions, long-term impact on the sustainability of the pension system

"Switzerland must find a balance between financial sustainability and citizens' purchasing power."

Useful tools for planning

To estimate the pension strategy, try pianificatore pensionistico and simulatore 3° pilastro.

Key points

What to do now

Next steps for citizens

Swiss citizens must follow the decisions of Parliament and the Federal Council, scheduled for the coming months. For example, in September 2023, Parliament will discuss the AVS 21 reform, which provides for a 0,4% increase in VAT to finance pensions. In Zurich, Geneva and Lausanne, cities with a high cost of living, this increase could have a significant impact on purchasing power.

Monitoring decisions

Monitoring decisions is crucial. For example, the Federal Council has proposed an increase in VAT from 7,7% to 8,1% starting in 2024. This increase could generate approximately 1 billion additional Swiss francs per year for AVS. Citizens can consult the official websites of the Swiss Parliament and the Federal Council to stay updated.

Preparing for the referendum

In view of the possible referendum on the VAT increase, citizens should inform themselves. For example, in 2022, the Canton of Ticino saw a 6,5% increase in consumer prices. A further increase in VAT could worsen this situation. Consult the official website of the Federal Council for details about the referendum.

Useful tools

To calculate the impact of the VAT increase on their purchasing power, citizens can use the calcolatore di imposte available on the Frontaliere Ticino website.

Operational checklist

• Get informed: Follow the parliamentary discussions on the AVS 21 reform.
• Calculate: Use the tax calculator to assess the impact of the VAT increase.
• Participate: Find out about the ways to participate in the referendum.

Comparison of scenarios

• Current scenario: VAT at 7,7%, inflation at 2,1% (Swiss average 2023).
• Post-increase scenario: VAT at 8,1%, estimated inflation at 2,5% (2024 estimate).
• Impact: A household in Lugano with monthly expenses of 5.000 CHF could see an increase in costs of 20 CHF per month.

"The VAT increase is necessary to ensure the sustainability of AVS, but it could have an impact on the purchasing power of Swiss families." — Federal Department of Finance, 2023.

Source: swissinfo.ch