Tax breaks on the cards for married couples

Couples are considered a tax entity Keystone

Parliament is to make a new attempt to lessen the tax burden for married couples compared with unmarried working couples.

For years the Federal Court has criticised the unfair fiscal system for married couples in Switzerland but the government has proposed immediate measures to do away with tax discrimination.

A previous effort to amend the federal tax system failed in a nationwide vote in 2004 alongside a package of tax breaks.

Under the current federal fiscal system, a married couple has to pay tax as a single entity. In cases where both husband and wife work, incomes are added together and taxed jointly rather than individually, as is the case for couples that live together.

The present direct federal taxation penalises working married couples, despite the fact that they receive a tax deduction – SFr7,600 ($6,240) of their total income is tax deductible.

For example, in a couple where the man has a taxable income of SFr60,000 while his partner earns SFr40,000, if the couple are not married, the man pays taxes of SFr849 and the woman SFr284 – a total of SFr1,133 per year.

If this same couple are married, they pay tax on their combined income of SFr92,400 (SFr100,000 – SFr7,600) – which adds up to a total of SFr1,969.

The more couples earn, the greater are the inequalities.

Reform rejected

This fiscal discrimination is long-standing. Back in 1984 the Federal Court asked the authorities to amend the Swiss tax system.

Five years ago parliament finally agreed to tax married couples by applying “partial splitting” and dividing their total income by a factor of 1.9.

The reform was bundled together with a series of highly controversial tax changes but was rejected at the ballot box in May 2004.

The government went back to the drawing board and in mid-May this year decided to propose a series of “immediate measures that are simple, easy to implement and which could be easily financed” to relieve the tax burden on married couples.

The idea is to initially counter the discrimination by applying a tax-deductible allowance. The government plans to replace the SFr7,600 allowance for double incomes by proposing that half the lower of the two incomes is made tax deductible.

Under the new proposed changes, a minimum of SFr7,600 of the lower income will be tax deductible, rising to a maximum of SFr12,500.

An additional tax allowance of SFr2,500 would be granted to all married couples to prevent new tax differences between households with two wage earners and those with just one.

Experts say the bill is likely to win approval in parliament as all political parties agreed during the consultation procedure to do away with discrimination suffered by married couples.

However, these immediate measures represent just the first step in a process of far-reaching reforms to the family taxation system, which the government are due to propose later this year.

swissinfo, Olivier Pauchard

Key facts

The measures proposed by the government to address this discrimination will be discussed in the Senate on June 13 and in the House of Representatives at a later date.
If they are approved, the measures should come into force on January 1, 2008.
The effects will only be noticed from 2009 onwards.
These measures will result in less tax income: SFr540 million for the federal government and SFr110 million for the cantons.

In brief

Direct taxes are not only levied at federal level, but also by the country’s 26 cantons. Based on the tax laws of their canton, the local authorities also levy direct taxes.

When taxing families, the income of spouses who are legally married and living together as husband and wife is added together. Couples living together are taxed individually.

Tax must be paid if a person’s taxable income is SFr29,200 or more in the case of a married couple, or SFr16,900 in the case of other people liable to pay tax.