Swiss Senate pushes back on VAT increase for funding army

Two Council of States committees want a lower VAT rate for the armed forces Keystone-SDA

The Swiss government is facing opposition to its plans to increase Value Added Tax (VAT) to fund the armed forces. Two Senate committees have called for a smaller VAT increase than that proposed by the government, as well as an alternative funding model.

The government wishes to increase the standard rate of VAT by 0.5 percentage points for a period of twelve years to finance defence projects. The Senate’s Security Policy Committee (SIK-S) rejected this proposal by 8 votes to 3, with 1 abstention, as the Parliamentary Services announced on Thursday.

There was no dispute within the SIK-S that, given the deteriorating security situation, a fund with borrowing powers is necessary to finance defence equipment for the armed forces. However, it wishes to finance it through a different approach.

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Like the Finance Committee of the Senate (FK-S) before it, the SIK-S also came out in favour of increasing the standard VAT rate by just 0.2 percentage points. The SIK-S also intends to follow the FK-S’s lead regarding the overall funding concept for the fund. It had previously discussed several different concepts.

In addition to VAT, the committees wish the fund to be financed from ordinary budget surpluses. The SIK-S is also proposing additional contributions to the fund from the general federal budget, divided into earmarked and non-earmarked contributions.

Both committees wish to decouple the creation of the legal framework for the fund from the referendum on the VAT increase.

The Senate will decide on the matter this autumn.

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Translated from German, reviewed by an English Department journalist.