VAT at 0,2% and a 24-billion defense fund: the compromise for the States (cross-border guide)

Context

In brief

• The Council of States approves the compromise by 25 votes to 17
• VAT would rise by 0.2 percentage points for 18 years
• The defense fund would reach 24 billion
• The population will also have to vote on VAT

Key facts

• Decision → Council of States
• Vote → 25 to 17
• VAT → +0.2 points for 18 years
• Fund → up to 24 billion
• Fund debt → up to 12 billion
• F-35 → from 36 to around 30
• Additional credit → 394 million francs
• Next steps → National Council and popular vote

With 25 votes to 17, the Council of States approved a proposal providing for a temporary increase in VAT and a fund to finance military purchases. It is a step forward, not the end of the matter.

Now it is the National Council’s turn. On the VAT increase, the final say will rest with the population: the compromise is still going through parliamentary and popular procedures.

The Council of States’ compromise

The Government had proposed a 0.5-percentage-point increase in VAT for 12 years. The Council of States chose 0.2 points for the next 18 years. The compromise also provides for a Fund for Security and Defense, with a maximum capacity of 24 billion and the possibility of incurring debt of up to 12 billion, compared with the 6 billion proposed by the Government. The financing would come from VAT, half of the ordinary financing surpluses and other contributions from the federal budget.

On Modem, the exchange between national councillors Martin Candinas, of the Centre, and Bruno Storni, of the PS, showed the political divide. Candinas considers it necessary to have the resources for investments, while acknowledging the problems that emerged in managing some purchases. Storni, on the other hand, questions the army’s ability to use the resources already available effectively. “Before giving new money, one should see that the money they already have is being managed well,” he stated. He also recalled that the army’s budget has increased since 2022 and that, including military expenditures outside the budget, such as those linked to the militia army, it would come to around 1% of GDP.

The divide also runs through the right-wing parties: in the Council of States, the UDC appeared more willing than the PLR to accept new taxes for the army, while the Radical Liberals prioritized savings. Candinas argued that the PLR and UDC should be ready to raise taxes in order to have a strong army.

The procurement issue is weighing on confidence. The source cites delays and additional costs for F-35s, Israeli drones and the modernization of Duro vehicles. In 2020, the maximum credit of 6 billion for the new fighter aircraft was approved with 50.1% of the vote; the Federal Council then chose 36 F-35s. After the 2022 contract, it emerged in 2025 that the price considered fixed by Bern was not guaranteed by the United States. At the end of June, the Confederation estimated additional costs of between 650 million and 1.3 billion, while the Federal Council reduced the purchase to around 30 fighter jets and requested an additional credit of 394 million. With Martin Pfister at the head of the DDPS in 2025, a new phase began, also marked by the departure of key figures.

To compare a personal simulation without treating the proposal as already in force, calcolatore stipendio e imposte is available.

Operational details

The practical reading of the compromise

For those living in Switzerland, the question is not yet which rate to apply: passage through the National Council and a popular vote are still pending. The practical reading consists of separating duration, source of funding and size of the fund. The two proposals have different timelines and profiles.

Two variants compared

The comparison does not make it possible to calculate how the cost of living for a family would change: reference rates, amounts per individual purchase and an annual estimate per taxpayer are missing. It does, however, make it possible to identify the point to monitor: the compromise concerns the size of the VAT increase, the timing and recourse to borrowing.

The management of procurement is also a variable in the debate. The delays and additional costs cited for F-35, Israeli drones and Duro vehicles have fueled doubts about the ability to use the resources. The issue is therefore twofold: finding additional money and assessing the management of the programs. The text does not present a definitive solution to the second problem.

GDP, alliances and territory

In the comparison of percentages, the reference figure is 1% of GDP: including military spending outside the budget, Storni already places spending around that threshold. The Swiss objective indicated is to reach 1% of GDP for defense by 2032, almost 9 billion francs a year, compared with the 6.5 billion spent last year.

The international debate also includes 2% of GDP, the threshold recommended by NATO to its members. The source on army financing also indicates that NATO countries are aiming for 5% by 2035. These are international references, not new Swiss rates.

The 80% figure moves the discussion to an operational level. At Meiringen, 80% of fighter-jet takeoffs take place using the afterburner, a procedure much noisier than a standard takeoff. This is information about the use of fighter jets, not an estimate of the fund’s costs.

To follow the possible effect on one’s personal budget without attributing to the proposal a figure that the text does not provide, one can consult costo della vita in Svizzera.

Recommended tools

For an updated estimate, use the net salary calculator and the CHF-EUR exchange comparator.

Key points

How to follow the dossier without confusing proposal and decision

The simplest way to read the next updates is to use a checklist with four checks. It serves to avoid conflating the VAT decision, the fund, and the armament programs, which are connected in the dossier but remain separate issues.

Four checks

1. Status of the procedure. Record separately the vote in the Council of States, the passage to the National Council, and the popular vote on VAT. Do not record 0,2 as an already applicable change: the population still has to express its view.

2. Duration and amount. Put the two parameters of the Council of States' proposal on the same line: 0,2 VAT points and 18 years. On a separate line, retain the Government's proposal: 0,5 points and 12 years. This way, the comparison does not lose the relationship between rate and period.

3. Fund and financing. Check whether the text retains the limit of 24 billion, the power to borrow up to 12 billion, and the specified sources: VAT, half of ordinary financing surpluses, and other contributions from the federal budget. The reference to 6 billion belongs to the Government's proposal.

4. Purchases. Keep the financial verification of the fund separate from the verification of the programs. The text refers to F-35, Israeli drones, and Duro vehicles in connection with delays and additional costs; regarding the F-35, it indicates the reduction from 36 to approximately 30 fighter jets and the need for an additional credit of 394 million.

What to note in the next steps

The available text does not indicate a date for the debate in the National Council or for the popular vote. The correct check therefore consists of checking when the dossier moves to a different chamber and whether the content remains that approved by the Council of States. There is no need to anticipate an outcome for Parliament or the population: the text points to resistance on both the left and the right.

Until the procedure is concluded, the comparison with the daily budget must remain a simulation. Once there is a final decision, the operational reference may also be the dichiarazione delle imposte. For a personal simulation, use the calcolatore stipendio e imposte.

Source: rsi.ch