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Tax breaks for elderly meet resistance

Most people in Switzerland live in rented accommodation Keystone

Retired home owners stand to receive tax benefits if a leading home owners’ association wins a majority for its proposal in a nationwide ballot on September 23. It is the third vote on a similar issue this year.

Supporters from the major centre-right and right wing parties argue the proposal is very much in line with a “typical Swiss virtue of living a debt-free life” as Hans Egloff, president of the Home Owners Association puts it.

According to the campaigners the tax system currently penalises those home owners who have paid off their mortgages, as they can no longer claim the corresponding deductions.

All home owners are taxed on the rental value of their property – based on the income they would receive if the accommodation were in fact rented out – a system unique in Europe, according to Egloff, a member of parliament for the right wing Swiss People’s Party. In a bid to balance out the system proprietors can claim deductions for mortgages and the maintenance of the property.

The initiative seeks to give elderly owners the choice to opt out of the rental value but forego the deductions.

“It is a reasonable and well-balanced proposal,” says senator Brigitte Häberli of the centre-right Christian Democrats. “It is unfair and unjust of the state to punish those who believe in taking responsibility for themselves.”

Dismissing allegations by opponents that the initiative is benefiting the well-off, campaigners argue many old age pensioners have limited financial means.

Joachim Eder, a senator from the centre-right Radical Party, warns that Swiss households have run up about SFr650 billion ($663 billion) in mortgage debts, which would put not only the banks but the economy as a whole at risk should real estate collapse.

Tax privileges

However, a committee led by the centre-left Social Democratic Party and supported by the Greens and Liberal Greens, says the initiative would create unjustified tax privileges for some. “Older people would get a massive tax benefit at the expense of the younger generation,” a statement said.

The committee adds the initiative paves the way for “lucrative tax optimisation.”

It says other proposals are needed to tackle the abolition of the controversial rental value charge.

Pressure groups have also criticised the initiative as discriminatory since the majority of people in Switzerland live in rented accommodation.

“It is absurd to argue that retired owners should be encouraged to pay off their mortgages,” says Michael Töngi of the Swiss Tenant’s Association.


At the launch of the campaign in June, Finance Minister Eveline Widmer-Schlumpf acknowledged that the aim of the initiative was commendable, but said it was inconsistent and unbalanced.

“It fails to solve the issue of debt reduction. It is only accessible to some retired people,” she said.

Widmer-Schlumpf added that approval of the proposal by voters would lead to tax losses of an estimated SFr750 million ($765.4 million) annually for the federal, cantonal and local tax authorities.

The proposed reform would make the tax system more complicated for retired people.

She had put forward a wider overhaul of the tax system, notably the abolition of the rental value for all home owners. However, parliament rejected that idea last year.

Wrong beneficiaries

Christian Wanner, a senior member of the influential Conference of Cantonal Finance Directors, is categorical.

“There is no reason whatsoever to act. As a rule retired people in Switzerland are not in financial difficulties. Those who do need help are the young and the unemployed,” he told a news conference.

It is the third time this year that the Swiss have been asked to vote on an issue connected with home ownership. Both the previous votes were aimed at encouraging people to purchase their own homes, and were thrown out by 56 per cent and 69 per cent respectively.

Switzerland has a low home ownership ratio compared with other European countries. About two thirds of the people live in rented accommodation.

At stake are three issues at a nationwide level:

Besides the initiative for tax breaks for elderly home owners, voters are also to decide on a proposal to outlaw smoker lounges in restaurants and constitutional article aimed at promoting musical education.

An estimated 5.1 million people, including registered Swiss expatriates, can take part in the ballot.

As part of ongoing trials with electronic voting, about 164,000 citizens can have their say online.

It is the third in series of four nationwide ballots this year. A variety of issues at a cantonal and local level will also be put to the vote.

(With input from Andreas Keiser)

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR