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Switzerland Rejects VAT Cut For Hospitality Industry

by Ulrika Lomas, Tax-News.com, Brussels

13 August 2014


After years of industry lobbying, Eveline Widmer-Schlumpf, the head of the Swiss Federal Department of Finance, has explained why the Government has rejected calls for a value-added tax cut for the hospitality industry.

She said that a VAT cut to 2.5 percent from 8 percent would lead to an "unjustified privilege for the hospitality industry... and a high loss of tax revenue for the Federal Treasury as a result."

The proposals would have equalized the treatment of supplies of food and non-alcoholic drinks by restaurants and hotels and supplies by supermarkets.

Widmer-Schlumpf pointed out that take-away food is already subject to the reduced rate, but said that food and drinks provided by restaurants and hotels should continue to be subject to the 8 percent rate as these are provided as part of a larger, more expensive service.

To counteract the fall in revenues, the reduced rate would have had to be raised to 3.8 percent from 2.5 percent, she said.

The Federal Council has also expressed doubts that the tax reduction would be passed on to consumers. Meanwhile, the tax cut would amplify the regressive nature of VAT by leading to an increase in the tax burden on low and moderate income householders, while benefiting affluent taxpayers, Widmer-Schlumpf explained.

TAGS: VAT rates | tax | value added tax (VAT) | food | Switzerland | services | VAT goods & services classification

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