Swiss canton debates expanding tax at source privileges to all residents

A Great Councillor for Canton Bern has launched a new initiative aimed at giving every worker in the region the right to be taxed at source. Andrea Zyrd argued that unpaid taxes remain one of the most common forms of debt in Switzerland and that with a so-called tax at source system (Quellensteuer), many families will no longer have to pay large lump sums or spend large amounts of money trying to fill out their tax returns correctly.

What is tax at source (Quellensteuer)?

Currently, only holders of L-, S- and B-residence permits are allowed to be taxed at source - where tax income is calculated by employers and taken directly from a person’s monthly salary, meaning no tax return has to be filed every year. By contrast, Swiss citizens and C-permit holders have to either fill tax returns out themselves or pay for a tax advisor to complete them, with the final tax payments being taken in either one of three instalments each year. 

Under Zyrd's plans, any worker in Canton Bern with a taxable income, regardless of citizenship and residence status, would be allowed to be taxed at source. Companies of all sizes would be required to offer the service to their employees.

Swiss tax system can leave many in debt, official argues

While in many cases, filing your tax returns can be beneficial - as it allows you to benefit from tax deductions - Zyrd argued that the lump-sum tax payments can leave many in debt. 20 Minuten noted that around 330.000 people are sued by the government every year for not paying their taxes, with enforcement proceedings costing federal and cantonal authorities around 200 million francs a year.

By allowing everyone to be taxed at source, “debts, emergencies and administrative idleness” could be eased, Zyrd noted. She concluded that “with inflation and high health insurance premiums, it is becoming even more difficult for many people to pay their taxes on time," and that her plan will benefit those on both low and high incomes.

Co-head of the Bern debt advice organisation, Anita Nydegger, told 20 Minuten that the staggered instalment system can leave workers out of pocket. "If income collapses due to unemployment or illness, it becomes very difficult to pay off taxes from a time when you still earned well," she added. "According to our experience, a voluntary direct deduction would make it easier for many people to pay the taxes on an ongoing basis," Nydegger concluded.

FDP. The Liberals argue Swiss companies cannot afford it

In contrast, FDP. The Liberals councillor Daniel Arn pointed out that many companies can simply not afford to implement the “tax at source system”, as it would transfer the burden of filing tax returns over to all companies regardless of their size. He added that the regular deduction system could see families fall behind on other payments, and reduce their ability to appeal a tax ruling.

Zyrd said she expects her proposal - first submitted and actually accepted by the Bernese parliament in 2018, before not being acted upon - will finally be confirmed or denied by next spring. However, if plans fall through, the prospect of a referendum remains on the horizon.