Parliament has scotched plans by the government to simplify the tax system and introduce a single value added tax (VAT) rate of 6.5 per cent.
The House of Representatives on Wednesday confirmed its rejection of the proposal which was launched in 2008.
Opponents argued the plan was unrealistic and would lead to extra costs for health and education.
Supporters said a unified rate would create more transparency and reduce the administrative burden.
Switzerland currently has a VAT rate of eight per cent, with special lower tariffs for the hotel sector and for essential consumer goods such as food.
The Swiss Business Federation said the decision harmed the economy, while the hotel industry welcomed the move as a step to boost their competitive edge.
The government now has to draft a new proposal for a two-tier rate system.
swissinfo.ch and agencies