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Swiss Federal Council Rejects Family Tax Initiative

by Ulrika Lomas, Tax-News.com, Brussels

11 October 2013


The Swiss Federal Council and the cantons have firmly rejected the "family initiative" put forward by the Swiss People's Party (SVP), insisting that the proposal merely serves to gives a tax advantage to single income families in Switzerland over their dual income counterparts.

The SVP's family initiative seeks to introduce a constitutional principle that parents who choose to look after their young children themselves, with one parent staying home from work, should be entitled to the same income tax deduction as those parents currently using third party childcare, both at federal and cantonal level. This places all families on an equal tax footing, and puts an end to fiscal discrimination, according to the SVP.

In contrast, the Swiss Federal Council defended the principle that family taxation must not serve to influence the family model. The Federal Council argued that all families in the Confederation currently benefit from various tax shelters, and are on an equal tax footing. The SVP's family initiative will merely destroy the status quo by introducing an element of inequality, the Federal Council underlined.

Defending its position, the Federal Council maintained that the tax deduction benefiting parents for third party childcare costs does not constitute any form of discrimination. If the same tax deduction were to be accorded to single income parents, they would ultimately be given a tax advantage, the Federal Council emphasized, noting that there are no costs associated with this form of childcare. In effect, the "traditional" family model would be fiscally favored, the Federal Council made clear.

Furthermore, the Federal Council underscored the benefits of the tax deduction for working parents, pointing out that the tax relief has not only improved equality among men and women, but has also increased the number of women in work, thereby creating additional jobs, and contributing to economic growth and increased fiscal revenue.

Finally, the Federal Council concluded by warning that the family initiative will result in a significant shortfall of fiscal revenues for the Confederation, cantons, and communes. If, for example, the legislator decided to accord the CHF10,100 (USD11,092) maximum deduction for third party childcare to stay-at-home parents, the measure would lead to a loss of income for the state of CHF390m annually, and would reduce cantonal and communal revenues by an estimated CHF1bn a year, the Federal Council ended.

TAGS: tax | Switzerland | tax breaks | individual income tax

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