Swiss government proposes additional VAT increase to fund the army

The Swiss government has proposed a 0,8 percentage point VAT increase to fund the army. Two VAT increases are now due to be put to a referendum in 2027.

Temporary VAT increase needed to fund the army

The Swiss government has announced that it wants to invest an extra 31 billion Swiss francs into the army and national security. In order to fund this, the Federal Council wants to temporarily increase value-added tax (VAT) by 0,8 percentage points, reports 20 Minuten.

VAT in Switzerland currently sits at 8,1 percent, which is relatively low when compared to other European countries such as Germany at 19 percent and in France at 20 percent. VAT is where tax is applied to consumer purchases such as chocolate, cheese and alcohol.

The 31 billion Swiss francs raised would be used across 10 years, equating to around 2,5 billion Swiss francs per year. While some political parties agree in principle to additional funds for the army, the SP, SVP and FDP argue that the money should not come from a VAT increase.

VAT increase to fund AHV pending approval

The 0,8 percentage points VAT increase is not the only proposal on the table. The government also wants to raise VAT by 0,7 percentage points to fund the 13th month payment of the AHV pension, due for payment for the first time in December. Introducing that policy alone would take VAT up to 8,8 percent.

Both proposed VAT increases are subject to a referendum and, if approved in 2027, could come into effect in 2028. If introduced together, VAT could rise to 9,6 percent in Switzerland. However, the government has not yet confirmed if this would be the case, and both proposed increases are to be voted on separately.