Switzerland proposes higher VAT to raise $31 billion for defence

Switzerland’s Federal Council has proposed raising value-added tax (VAT) for 12 years to generate an additional 24 billion Swiss francs ($30.7 billion) to strengthen the country’s defence capabilities.

Under the proposal approved by the government on August 12, the standard VAT rate would rise by 0.5 percentage points, from 8.1% to 8.6%, starting in 2028. The special rate would increase by 0.3 percentage points to 4.1%, Caliber.Az reports. 

The government said the additional funds would finance military investments, including measures to protect critical infrastructure, strengthen the army’s combat capabilities and improve its ability to detect threats.

“To counter the most likely threats, namely hybrid operations and threats originating from abroad, the army will require 24 billion francs in additional investment in armaments over the coming years,” the government said.

The proposal includes the creation of a special armaments fund to manage the additional revenue generated by the tax increases.

The plan has been submitted to parliament for consideration. Implementing the measures would require a constitutional amendment, meaning the proposal would have to be approved in a nationwide referendum.

The latest plan is less ambitious than an earlier proposal by Defence Minister Martin Pfister, which called for a 0.8-percentage-point VAT increase over 10 years to raise about 31 billion Swiss francs ($40.2 billion) for additional defence spending.

That proposal faced opposition during consultations, prompting the government to reduce the planned tax increase and extend the period over which it would apply.

By Sabina Mammadli