Switzerland: Contemplating VAT Increase to Finance 13th AHV Pension
Switzerland’s Federal Council is gearing up to implement the 13th AHV old-age pension annually from 2026, following the adoption of a popular initiative in March 2024. The move, expected to incur CHF 4.2 billion in additional expenditure in its first year, prompts the government to consider viable financing options.
To fund the pension increase, the Federal Council proposes two strategies: a combined increase in wage contributions and VAT. Specifically, the second option entails a notable VAT boost of 0.4 percentage points, alongside an increase in wage contributions.
Amidst deliberations, it’s worth mentioning that Switzerland’s VAT currently stands at 8.1%, which is lower than in many other European countries. Nevertheless, the proposed increase underscores the government’s commitment to ensuring sustainable financing for the pension expansion.
The government aims to present both financing plans to parliament this year, alongside a broader pension reform proposal for 2026. This includes exploring structural measures such as raising the retirement age, considering the rejection of a similar proposal in the March 3 plebiscite.
Source: admin.ch
