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Swiss VAT Increase Proposal: A Timeline and Overview
Switzerland's Federal Council has proposed a rise in the Value-Added Tax (VAT) in line with the National Council's suggestion, aiming to address growing expenses for the AHV pension. Here's a look at the history and key events surrounding the VAT in Switzerland.
1998: The people accepted the Finòv initiative, leading to a temporary increase in VAT by 0.1 percentage points.
1999: Following a referendum, VAT was increased by 1 percentage point.
2009: The people agreed to a temporary increase of 0.4 percentage points in VAT to address IV's troubles.
2014: The approval of the railway initiative "Fabi" led to the only reduction in VAT history, with the rate standing at 7.7 percent.
2017: The political compromise "Pension 2020" was implemented, including a further increase in VAT by 0.6 percentage points.
2022: The AHV-21 reform raised the standard rate to 8.1 percent.
2023: The National Council and the Council of States have approved an increase in the VAT by 0.7 percentage points, with the intention to finance the 13th old-age and survivors' insurance pension. The Federal Council has proposed a rise to 8.8 percent, a suggestion largely aligned with their proposal.
It's worth noting that unlike income or wealth taxes, VAT does not depend on financial circumstances. Since its introduction in the mid-1990s, VAT has served as a reliable source of income for AHV, IV, or infrastructure projects. The trend of the VAT rate is upwards, with Switzerland still belonging to the countries with the lowest VAT rates in Europe, but many EU countries levy rates between 19 and 25 percent.
However, the no vote in a previous proposal led to the rejection of an increase at the ballot box. The long-term security of the old-age pension remains unresolved, and the VAT increase is set to remain in effect until the year 2030, amounting to three to four billion francs in additional expenses for the AHV pension.
Value-added tax is a consumption tax levied on almost all goods and services, and in times of national emergencies, it has become a purpose tax in Switzerland. The VAT increase, if approved, would mark another step in the upward trend of the tax rate. The outcome of the upcoming referendum will determine the future of the VAT in Switzerland.
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