Swiss Approve Bill To Increase VAT

by Ulrika Lomas, Tax-News.com, Brussels

02 October 2009

In a recent national referendum, Swiss voters approved a bill proposing to temporarily increase the standard rate of value-added tax (VAT) in Switzerland.

In a bid to reduce the country’s mounting disability insurance deficit, voters approved by a narrow majority a temporary increase in the standard rate of VAT from 7.6% to 8%. Effective from 2011, the increase will be limited to a period of seven years, and is due to end in 2017. Originally, the proposed VAT increase was due to take effect from January 1, 2010.

In order to pass the bill, requiring an amendment to the Swiss constitution, not only was a majority of votes necessary, but also a majority of the cantons had to vote yes. For a while, the outcome of the referendum lay very much in the balance. The bill was finally adopted by 54.5% (with 12 of the 23 cantons voting in favour).

President of the Social Democratic Party Christian Levrat referred to the outcome as a victory for common sense. According to Levrat, the temporary increase in VAT was a bitter but necessary pill, vital for resolving the financial dilemma faced by the government. The Christian Democratic Party was equally delighted with the result, emphasising the importance of the bill.

Outgoing Interior Minister Pascal Couchepin particularly welcomed the result. Couchepin has long since supported the bill, describing it as an important milestone along the way to improving the country’s social welfare system. “We were able to convince the people” he remarked.

In stark contrast, however, the Swiss People's Party vehemently opposed the initiative, stating that an increase in VAT will merely serve to delay Switzerland's exit from the economic crisis.

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