Swiss Lawmakers Oppose Family Allowance Tax Exemption

by Ulrika Lomas, Tax-News.com, Brussels

16 December 2011

Switzerland’s State Council, or upper house, has recently rejected for the second time cantonal initiatives proposing that family and educational allowances should be exempt from cantonal income tax.

The smaller chamber voted narrowly against the proposals by 19 votes to 14. The Swiss National Council had narrowly approved the initiatives from cantons Aargau and St Gallen back in March.

Opposing the request, Commission spokesman Pankraz Freitag insisted that taxing the allowances is in accordance with the current system, as it involves a tax on economic capability.

Freitag pointed out that additional costs, arising from having children, are already taken into account in the family deduction, and explained that exempting the allowances from tax would lead to a resulting shortfall in fiscal revenues for the Swiss cantons of between CHF850m (USD900m) and CHF900m.

Defending the proposal, however, Urs Schwaller argued that following the birth of a child, parents lose around 40% of their purchasing power. To mitigate this effect, child and education allowances were introduced, Schwaller continued, while underscoring that the state immediately takes back around CHF1bn.

Determined to pursue the matter, however, the Christian Democratic People's Party (CVP) are currently gathering signatures for a people’s initiative, demanding tax exemption for the allowances.

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