2024-10-09 16:08:00
The center-left wanted the miracle tax, but the Federal Council messed up the idea
Parliamentarians hope that a new tax on financial transactions will bring in billions for the public purse. The fact that the federal government doesn’t think anything of it doesn’t discourage them.
Suddenly pay extra on your government mortgage? Depending on how a financial transaction tax is structured, owning a home – in the picture houses in Unterengstringen ZH – could become even more expensive.
Photo: Bally Gaetan (Keystone)
- The Federal Council rejects comprehensive financial transaction taxes for reasons of location attractiveness.
- An expansion of the emissions tax could bring in 200 million francs for the AHV.
- A mortgage tax of 0.1 percent could also generate high revenue.
- Council of States Beat Rieder is planning a push to introduce the tax despite headwinds.
The idea sounds good: Whenever someone buys a security or a currency, it should be taxed at such a minimal amount that it doesn’t hurt the actors involved. But because so many transactions take place, a large sum ends up being raised and thus helps to finance the state budget.
Does that sound too good to be true?
At least the Federal Council is of this opinion. On Wednesday morning he approved a report on the opportunities and dangers of financial transaction taxes in Switzerland. This was the fulfillment of a mandate that the Valais centrist Beat Rieder had brought through parliament two years ago: He wanted to know whether it was possible to “finance the AHV in the medium and long term” with such an instrument. The SP has been demanding such a tax for years. There were also suggestions for this from the Green Party.
The debate has after the Public approval of the 13th AHV pension get new momentum in spring. The additional pension will cost over four billion francs annually in the medium term. (Read Here is our reporting at the time on the debate about the alleged miracle tax.)
The Federal Council considers the introduction of a comprehensive tax, regardless of the intended purpose, to be nonsensical. The main reasons for this are as follows:
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Location attractiveness: Even if the tax per transaction is in the per thousand range, the parties involved feel it. The result would be that many of the affected actors would leave. Companies in the financial sector in particular are very mobile. “If this is the case, such a tax not only does not generate any tax revenue, but Switzerland also loses added value and thus revenue from other taxes,” says the report. This is especially true with regard to high-frequency trading, in which players automatically process billions of so-called trades every day.
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Unwanted influences on the market: Since the Great Depression of the 1930s, the financial transaction tax has been seen by many on the left as a means of combating market excesses. It is intended to curb speculation and reduce the volatility of prices, which is hoped to result in stability. However, research now shows that the measure tends to have the opposite effect.
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Justice: According to the constitution, taxes should be levied depending on economic performance. Anyone who owns, earns or consumes more is taxed more. Regardless of these factors, however, a financial transaction tax burdens those who trade a lot.
Joy about your 13th pension – and where will the money come from now? Trade unionists Daniel Lampart, Pierre-Yves Maillard and Vania Alleva (front row from left to right) in March after the acceptance of the referendum.
Photo: Peter Schneider (Keystone)
The introduction of a comprehensive financial transaction tax is therefore out of the question for the Federal Council. But he lists possible individual measures that would not cause quite as much damage. And shows how much the federal government could earn from it.
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Switzerland already has an emissions tax, whereby companies have to pay one percent to the federal government on capital increases. The population rejected abolition in 2022 at the ballot box. If politicians decided to take a step in the opposite direction and increase the levy to two percent, the federal government could collect 200 million francs annually. An additional issue tax on bonds or money market securities could bring in a similar amount.
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A tax of 0.1 percent per year on mortgages could lead to income of over 700 million francs per year.
However, the Federal Council also rejects these measures. An expansion of the emissions tax will reduce Switzerland’s attractiveness as a location and hinder the development of companies. A tax on mortgages increases the cost of homeownership, which contradicts the constitutional mandate to promote this cause.
Variants of the tax already exist, including abroad
In addition to the emissions tax mentioned, which brings in 250 million francs per year, Switzerland already has a sales tax. This is levied on every purchase and sale of securities through domestic traders and brings the federal treasury 1.3 billion a year. Switzerland is already collecting variants of a financial transaction tax.
Relative to the size of the economy, it takes in more than any other country. Similar taxes exist in Spain, Italy, France and the United Kingdom, among others. However, the tax has never been able to establish itself at the supranational level, although attempts were made at both the G-20 and the EU level after the financial and sovereign debt crisis in 2008. International coordination would be a mandatory prerequisite for comprehensive taxation without any evasive maneuvers by those affected.
Councilor of States Rieder is unimpressed by the Federal Council’s assessment. “After a detailed analysis and based on this report, I will still submit a proposal,” he says. “The advantages of the additional income outweigh the disadvantages.”
If Rieder were to succeed in parliament, it would take several years before the tax could be introduced. However, the additional AHV costs arise earlier, as the 13th pension will be paid out from 2026. The Federal Council is instead proposing financing the 13th pension through additional VAT percentages.
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