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Swiss Federal Council Opposes National Inheritance Tax

by Ulrika Lomas, Tax-News.com, Brussels

17 September 2013


The Swiss Federal Council has categorically ruled out the idea of a national tax on inheritances and gifts, maintaining that the measure would limit the taxing rights of the cantons.

The Federal Council therefore recommended that the popular initiative, calling for a reform of inheritance tax in Switzerland to finance the country's social security and pension fund (AHV), be rejected. The Federal Council tasked the Federal Department of Finance with drafting a corresponding message.

Defending its decision to reject the initiative and to maintain the status quo, the Federal Council emphasized that the financial impact of the proposed reform is hugely uncertain. It is not at all clear that current cantonal revenue levels could be preserved, the Federal Council pointed out. Furthermore, the Federal Council considered that it would be "disproportionate" to impose a tax on gifts with retroactive effect from January 1, 2012.

Switzerland's Conference of Cantonal Finance Directors (FDK) vehemently rejected the initiative back in May.

In Switzerland, the Swiss cantons and communes traditionally have the right to impose taxes on inheritances and on gifts, guaranteeing them considerable tax revenue. The rates of taxation vary from canton to canton. The Confederation does not currently levy a tax on inheritances and gifts. At the moment, surviving spouses are exempt from inheritance tax in all cantons, while descendants are exempt in the majority of cantons. The Swiss canton of Schwyz does not levy a tax on either inheritances or gifts, while Lucerne levies a tax on inheritances only. In 2010, inheritance and gift taxes served to yield CHF974m (USD1bn) for the cantons and communes.

Submitted on February 15, 2013, the popular inheritance tax initiative advocates the introduction of a federal inheritance and gift tax of 20 percent on inheritances in excess of CHF2m and on gifts of over CHF20,000 annually, to secure the future financing of the AHV fund. Under the plans, the Swiss cantons would be deprived of the right to levy their own such taxes. Given the resulting shortfall in income, the initiative proposes that one-third of the taxes collected would flow to the cantons, while the remaining two-thirds would be allocated to the AHV.

TAGS: inheritance tax | Finance | tax | tax rates | social security | gift tax | Switzerland | tax reform

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