Value Added Tax to Increase in Switzerland

September 28, 2009 Taxation in Switzerland  No comments

Swiss voters have approved an increase in the country’s Value Added Tax (VAT).

In a nation-wide referendum, held on the 27th of September, Swiss voters approved raising each of Switzerland’s three VAT rates. As of January 2011, the standard VAT rate in Switzerland will be 8%, compared to the current 7.6%. The VAT for lodging services will increase by 0.2% to 3.8%, and reduced rate items like food, newspapers and medicine will see a rate rise of 0.1% to a level of 2.5%.

The VAT increase, which won 54.5% voter approval, is expected to raise an approximate CHF1.1 billion annually, over the course of the next 7 years. The temporary tax increase is aimed at dealing with the CHF13 billion shortfall in Switzerland’s federal disability insurance regime. According to government statements, the insurance debt would have doubled within the span of the next ten years, were no action to be taken. Prior to the VAT increase approval, the Swiss government had resorted to using money from old-age pension funds to cover the shortfall.

The Swiss People’s Party, who opposed the tax increase, have already claimed that such tax increasing measures will ultimately harm the economic recovery of Switzerland, as it will have an inhibiting effect on consumer spending.

Leave a reply