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Switzerland Rules Out Child Allowance Tax Break

by Ulrika Lomas, Tax-News.com, Brussels

29 October 2013


The Swiss Federal Council has rejected an initiative advocating that child and professional training allowances be exempt from taxation in the future.

Defending its decision, the Federal Council argued that Switzerland's tax law already takes childcare costs into consideration, according various deductions, with the result that around half of all families with children in the Confederation (approximately 430,000) do not currently pay direct federal tax.

Furthermore, exempting child and professional training allowances from tax would not be a targeted measure, the Federal Council maintained, alluding to the fact that the proposal would predominantly benefit high-income families in the Confederation, while low-income families would hardly reap any benefit. Indeed, the tax burden on families with children that do not currently pay direct federal tax would not be lower at all, at least at federal level, the Federal Council said, emphasizing that the initiative would lead to a revenue shortfall for the Confederation, cantons, and communes of around CHF1bn.

On November 5, 2012, the Christian Democratic People's (PDC) party put forward its initiative aimed at supporting families in Switzerland. In its initiative, the party underlined the need for greater tax benefits to be accorded to families with children, by granting child and training allowances tax exemption. Given that both allowances constitute wage income, as they serve to increase the economic capacity of taxpayers, they are fully subject to taxation in Switzerland currently.

In a separate message, the Swiss Federal Council accepted the PDC's initiative calling for an end to the tax discrimination of married couples, compared to their non-married counterparts in the same situation. The Federal Council underscored that, if adopted, the initiative would introduce the principle of the joint taxation of married couples in the Constitution, thereby increasing the chances of finding a political compromise to end the problem of the over-taxation of certain married couples.

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

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