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Vote March 4, 2018 Federal taxes: billions of francs and muted opposition

A receipt from a bar showing the amount of VAT paid for two coffees

Value Added Tax is one of the main sources of revenue for the national government. Together with the federal tax it accounts for two thirds of the annual tax revenue

(Keystone)

Swiss voters will have the final say in March on the government’s right to tax its citizens and companies, including value added tax (VAT). This is a unique feature of Switzerland’s political system of direct democracy and federalism.

At stake is an impressive amount of money: two-thirds of the government’s tax revenue, or CHF43.5 billion ($44.4 billion) in 2016.

But the vote is not so much about the financial volume, but the legal justification which was enshrined in the country’s constitution 60 years ago. The system has to be submitted to parliament and voters at regular intervals.

The most recent such ballot took place in 2004. As the licence will expire by 2020, voters are called on to renew it for another 15-year term.

Doughnut chart showing sources of federal tax revenue
(swissinfo.ch)

There is virtually no opposition to the proposal, and discussions during the parliamentary debate focused on calls by the political right to shorten the term to ten years or to make it an unlimited licence as demanded by the left.

Following discussions in parliament in 2016 and 2017, both chambers approved the current timeframe as part of the 2021 financial programme.

As a result, campaign activities are expected to remain very limited and public attention is largely expected to focus on a people’s initiative aimed at scrapping the funding system of the Swiss Broadcasting Corporation

But that doesn’t mean that all voters will come out in favour of extending the federal tax programme.

Political observers say tax issues always carry the potential for a protest vote. In 2004, 26% of voters refused to grant the national government such a right. 

Meltdown

However, it is unlikely that opponents will have the upper hand on March 4. It is widely agreed that such a scenario would be a nightmare for the government.

“This would be a total meltdown and I don’t even want to think about it,” Finance Minister Ueli Maurer said at a news conference less than two months ahead of the vote.

He argues that the ballot is probably the most important vote on finances for the next 15 years.

“If voters were to say no, the Swiss government wouldn’t have enough funds and there’s no way we could find another source of revenue or introduce spending cuts of the same order.”

Critics

Opposition in parliament was very limited during the debates. Erich Hess from the rightwing Swiss People’s Party was one of the few critics who argued it was time to lower federal taxes.

Citizens would benefit as they would have more money available and companies could invest more, Hess told Swiss public radio, SRF. He also argued that the national government had spent far too much on welfare payments and bureaucracy.

Hess said he was aware that opposition was largely symbolic, but he believed it was right to take a clear political stance.

Maurer, also from the People’s Party, doesn’t mind the criticism. He believes it is the duty of citizens to question the activities of the state. He also welcomes a periodic review of the tax system by parliament and Swiss voters.

Three-tier system

Due to its federalist structure, Switzerland levies taxes at three separate levels: federal, cantonal and local.

Beside the federal government, the 26 cantons with their wide-ranging autonomy set their own rates. The 2,250 municipalities can levy taxes either at their own discretion or based on basic cantonal tax scales.

Historically, the original taxing power lay with the cantons. The federal government only began levying taxes about 100 years ago to pay for additional expenses during the First World War. Previously its main source of income was customs duties.

VAT was introduced 25 years later during the Second World War. Both direct federal taxes were enshrined in the country’s constitution in 1958 but with a clause saying they must be reviewed regularly.

+ For further information on Swiss tax systemexternal link

swissinfo.ch


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