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Swiss Cantons Reject 'Flawed' Inheritance Tax Initiative

23 May 2013   (0 Comments)
Posted by: Author: Ulrika Lomas
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Source: Ulrika Lomas (Tax-News.com, Brussels)

Switzerland's Conference of Cantonal Finance Directors (FDK) has vehemently rejected the people's initiative, calling for a reform of inheritance tax, to finance the country's social security and pension fund (AHV).

To secure the future financing of the AHV fund, the initiative advocates the introduction of a federal inheritance and gift tax of 20 percent. Under the plans, the Swiss cantons would be deprived of the right to levy their own such taxes. Given the resulting shortfall in income, the initiative proposes that one-third of the taxes collected would flow to the cantons, while the remaining two-thirds would be allocated to the AHV.

The proposed introduction of a high tax-free allowance for both taxes aims to ensure that the fiscal burden on the Confederation's middle class would not be increased as a result. Consequently, the 20 percent tax would be imposed on inheritances in excess of CHF2m (USD2.1m) and on gifts of over CHF20,000 annually. Under the proposals, married couples and registered partnerships would be exempt from the tax, while businesses and farmers would be granted tax relief, to preserve both jobs and their future.

Given that the required number of valid signatures was finally collected in March of this year (110,205), a referendum will now take place.

Fiercely opposed to the idea of a federal inheritance and gift tax, the FDK argues that the measure is an attack on the taxing rights of the cantons. The cantons are currently able to determine their own taxes and should continue to do so the FDK emphasizes, highlighting the fact that inheritance and gift taxes currently yield around CHF1bn for Switzerland's 26 cantons.

Alluding to the numerous flaws in the initiative, the FDK insists that the earmarking of general tax revenues for one specific purpose is fiscally inappropriate. The fundamental challenges facing the AHV system will not be solved by introducing a federal inheritance tax, the Conference warns.


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