Swiss Plan's VAT Hike to Bolster Defence Budget

The Swiss government has proposed a temporary 0.5% VAT increase over 12 years to support an additional 24 billion Swiss francs in defence spending. This measure involves creating a new arms fund partially financed by this VAT hike and could borrow up to 6 billion francs.

On Wednesday, the Swiss government announced a proposal to raise the value-added tax by 0.5 percentage points over the next 12 years. This initiative aims to generate 24 billion Swiss francs ($29.56 billion) in additional defence funding.

The increase in VAT will help establish a new arms fund, which will be financed partly through the temporary tax hike as well as the existing army budget. The government outlined plans for the fund to have borrowing capacity up to 6 billion francs.

Importantly, the Swiss government acknowledged that reduced VAT rates on essential items such as food and medicines would remain untouched. This aspect ensures that the tax hike does not disproportionately affect the cost of living for citizens.