Switzerland’s favourite budget trick is running out of road

Switzerland is discovering, once again, that there are few things Bern likes more than a tax instrument that can be made to do several jobs at once. On 29 November, voters will decide whether VAT should rise by 0.4 percentage points to finance the 13th AHV pension. Meanwhile, parliament is already discussing a further 0.2 percentage point increase for the army, and the extension of an existing VAT promille for rail infrastructure beyond 2030.

It is a tidy arrangement, at least on paper. One tax, three spending wishes, and a political class that can pretend the arithmetic is merely technical. Yet the very breadth of the proposal says something less flattering about federal budgeting: when every new demand ends up on the same invoice, fiscal policy starts to look less like strategy than habit.

The SVP wants no part of that reflex. National Councillor Lars Guggisberg argues that VAT has become an all-purpose creature and that this cannot go on. He warns against drifting towards foreign tax levels of around 20 per cent and says the federal budget has to be brought under control instead. In his view, that means saving, including in international cooperation and asylum spending. For the party of thrift, at least in theory, the answer is always to spend less before taxing more.

The Centre takes the opposite line. Fraktionschefin Yvonne Bürgin says Parliament has already tried saving, including through EP27, and with only partial success. She argues that cuts alone are not enough because the needs are simply too high. The army must be equipped, she says, and the rail infrastructure fund also needs money. The Centre is the only party in this debate willing to back higher VAT not just for the AHV, but also for defence.

The SP, predictably, would prefer a different source of money. If defence spending has to rise, Sarah Wyss says, then other, more social revenue streams should be opened up instead. She points to inheritance tax and wealth tax as fairer options for certain investments, and says lobbying is strong in those areas. On the AHV, however, she sees the VAT increase as justified, because the 13th pension benefits everyone and is paid to everyone.

The FDP rejects that logic altogether. Co-president Susanne Vincenz calls the plan a tax sleight of hand: a group is told it is receiving something, while daily life becomes more expensive and the gain is smaller than advertised. For the FDP, as for the SVP, the problem is not a lack of imagination in taxation but a lack of discipline in spending.

That is why the vote on 29 November matters beyond the AHV itself. If the first VAT increase is rejected, parliament will have to be more creative, whether through new taxes or another round of savings. Either way, the comforting illusion that one broad tax can quietly finance every political wish is wearing thin. Bern may dislike that lesson, but it has been writing the same one for years.

Written by Thorben Thiede thorben.thiede@alpineweekly.com