Swiss Federal Council Rejects Energy Tax Initiative
31 May 2013
Posted by: Author: Ulrika Lomas
Source: Ulrika Lomas (Tax-News.com, Brussels)
The Swiss Federal Council has rejected the popular initiative calling for value-added tax (VAT) in the Confederation to be replaced by an energy tax.
Submitted by the Green Liberal Party (GLP), the initiative advocates that a tax be imposed on non-renewable energy in the Confederation, including petrol, gas, and oil, and recommends at the same time that VAT be abolished. Although the Federal Council supports the main thrust of the initiative, namely to introduce fiscal incentives to achieve the country’s climate and energy policy objectives, it nevertheless fundamentally rejects certain key aspects of the text.
The GLP makes clear in its initiative that the amount of the proposed energy tax should be set in such a way as to yield the same revenue level as currently flows from VAT. The Federal Council argues, however, that such a high rate of tax could simply not be justified by the pursuit of these environmental goals.
The Federal Council emphasizes that it would not be efficient to abolish VAT, given that this tax constitutes the main source of fiscal income for the Confederation, and in view of the fact that it plays a key role in the financing of the country’s social security system. At international level, VAT is considered to be a highly efficient levy, whose impact on the economy is considerably less than from direct taxes, such as income or profit tax and social insurance contributions, the Federal Council adds.
Furthermore, the Federal Council warns that replacing VAT with an energy tax would be disadvantageous for businesses in Switzerland. The Federal Council points out that companies are barely affected by VAT, as they are generally able to pass the tax on to consumers and as exports are exempt from VAT, to guarantee international competitiveness. In contrast, an energy tax would affect exports, and would also adversely affect low-income households in Switzerland, the Federal Council stresses.
Finally, the Federal Council vehemently rejects the idea that the initiative could be implemented swiftly, within a few years, underscoring the importance of allowing businesses and individuals sufficient time to adapt to the measures.
On May 25, 2011, the Federal Council decided to progressively phase-out the use of nuclear power. As part of its Energy 2050 Strategy, the Federal Council plans as a first step to introduce a number of fiscal incentives to encourage individuals to use renewable energy sources. From 2021, as part of the second phase, the Federal Council plans to replace this incentive system with a steering mechanism, in the form of a tax on energy.
The Swiss Federal Department of Finance, the Federal Department of the Environment, Transport, Energy and Communications, and other departments, have been tasked with drawing up proposals to facilitate the transition between the two systems and to put forward proposals for the incentive system. These proposals are to be presented to the Federal Council by autumn 2013.