Switzerland must reform to keep global lead, says OECD

OECD endorses tax and pension reforms Keystone-SDA

Switzerland must embrace tax and pension reforms to preserve its status as one of the world’s top economies, the OECD said, raising its growth forecast for the country.

The Paris-based organisation now anticipates expansion of 2% this year, up from 1.1% predicted in June, following a surprisingly strong performance in the second quarter.

Officials cautioned that risks of trade impediments and a renewed appreciation of the franc remain elevated for the export-oriented economy.

Looking ahead, the OECD stressed that Switzerland faces housing shortages, an aging population and growing geopolitical challenges that will create long-term spending pressures, requiring the government to increase tax revenue.

“Prudent macroeconomic management, including a successful debt brake rule, have been key to withstanding repeated shocks,” it said in a report released Tuesday. “But reforms will be needed for Switzerland to remain one of the world’s most competitive and innovative economies.”

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Recommendations include an ambitious pension overhaul which links the retirement age to gains in life expectancy, advice it also recently gave France. Switzerland should also reform its property tax so older and wealthier households get incentives to leave large dwellings.

“Switzerland has every reason to look to the future with confidence,” OECD Secretary General Mathias Cormann told reporters in Bern. “The task in front of Switzerland to keep the strong momentum going into the future is to secure fiscal sustainability as people live longer, to broaden productivity growth across more firms and sectors and to unlock housing supply.”

Ahead of a vote on new treaties with the European Union, the OECD urged Switzerland to preserve its access to the European single market while also diversifying its trading partners.

Exports amount to about 78% of gross domestic product, with the EU accounting for almost 40% of Swiss shipments and the United States for more than 20%.

The OECD also said Switzerland’s rules governing lobbying lack transparency and called for a code of conduct and a register of lobbyists.

The organization joined the IMF and all local regulators in supporting the Swiss government’s strict stance on new capital requirements for UBS.

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