The National Council has accepted a motion that would allow both citizens and holders of Swiss residence permits to benefit from being taxed at source (Quellensteuer). Currently, only B and L- residence permit holders are allowed to be taxed directly through their salaries, with the rest having to fill in a tax return.

Swiss National Council looks to reform tax system

By 95 votes to 88, the lower house of parliament has voiced its support for allowing all people in Switzerland to benefit from being taxed at source. The idea, proposed by Social Democratic National Councillor Emmanuel Amoos, is to allow all workers to choose whether they would like to be charged tax at source, or fill in a tax return.

Currently, only holders of short-term residence permits are allowed to use the “taxed at source” system, known in German-speaking areas as Quellensteuer. The system means that these expats do not have to fill out a tax return, as their tax burden is deducted from their monthly salary via their company, which then gives the contributions directly to federal, cantonal and local governments.

Everyone allowed to use Quellensteuer under new plans

The new plans would give anyone, regardless of residence or citizenship status, the right to be taxed at source. While freelancers and people with multiple income streams, high income, private insurance and mortgages would likely still choose to benefit from the tax deductions given through a tax return, others would choose the simpler route as they wouldn't have to worry about filling in forms or hiring tax advisors.

Speaking to Le Matin, Amoos added that the idea would also help the many families and individuals who are in “tax arrears” pay their burden sustainably. According to the Federal Statistical Office, 10 percent of people in Switzerland still owe taxes.

“These tax debts are the most frequent cause of payment arrears and constitute the number one problem of over-indebtedness in our country. One in five prosecution proceedings are related to unpaid taxes in Switzerland. We are talking about 500.000 lawsuits every year!” he added.

Swiss business worried about extra administrative burden

In opposing the vote, according to Le Matin, some politicians argued that the change would lead to extra costs for both entrepreneurs and the tax authorities, and that the system would make people less aware of what they are putting into the system. The Economic Affairs and Taxation Committee of the National Council (CER) said that it would not support the plan on this basis.

Swiss People’s Party National Councillor Esther Friedli told Le Matin that the change would lead to “a significant new administrative burden for employers and the administration." With every person given the right to choose, she argued businesses would have to spend a lot of money keeping "records of each employee and what type of tax return they want."

In response, Amoos made the point that the system is already used by around 10 percent of taxpayers in his home canton of Valais. He also contradicted the CER, arguing that changing the system would make people more aware of their own tax contribution as it would become a regular part of their payslips.

The Council of States and Federal Council are due to comment on the plans in the coming days.