The Swiss government is planning a temporary increase to its value-added tax (VAT) to bolster military spending. The proposal aims to finance a revamp of outdated military equipment, addressing concerns about the deteriorating security landscape in Europe. The government intends to raise the sales tax by 0.8 of a percentage point for a 10-year period, starting in 2028.
The government stated that decades of budget cuts have left the army insufficiently equipped to counter current threats. An estimated 31 billion francs (approximately $40 billion AUD) is needed to substantially improve the nation’s security situation. The additional tax revenue will be allocated to a dedicated fund for military purchases. While this fund can incur debt, it is mandated to be debt-free by the end of the 10-year period.
The plan requires approval from lawmakers and will be subject to a national vote due to Switzerland’s direct democracy system. The current standard VAT rate in Switzerland is 8.1 per cent, one of the lowest in Europe. The government aims to present a draft law by the end of March, with parliamentary consideration in autumn. A national vote is tentatively scheduled for the summer of 2027, allowing the tax increase to take effect on January 1, 2028.
The proposal’s success in a plebiscite is uncertain, particularly as a separate proposal to raise VAT to 8.8 per cent to fund pension increases is also under consideration. Previous delays in parliament have already disrupted the government’s initial timeline for the pension-related VAT increase, which was originally slated to take effect this month.
