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Federal Council adopts message on individual taxation

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The Federal Council

Bern, February 21, 2024 – At its meeting on February 21, 2024, the Federal Council adopted the message on the popular initiative “For individual taxation independent of marital status (Tax Justice Initiative)” and on the indirect counter-proposal (Federal Law on Individual Taxation). With the change from married couple taxation to individual taxation, the so-called marriage penalty could be abolished and positive incentives to work could be created. The Federal Council recommends that the popular initiative be rejected in favor of the indirect counter-proposal.

The Federal Council decided on the key parameters of the reform in August 2023 based on the results of the consultation. Accordingly, the indirect counter-proposal envisages taxing all people individually, regardless of their marital status. The income and assets of married couples are divided according to civil law, as is already the case with unmarried couples today. The child tax deduction for direct federal tax will be increased from the current 6,700 francs to 12,000 francs and will be divided equally between the parents. The direct federal tax rate will also be adjusted: the tax rates for low and middle incomes will be reduced, the basic tax allowance will be increased and the amount at which the maximum rate of 11.5 percent is reached will be reduced. These tariff adjustments enable the reform to be relieved more evenly across income classes.

Financial effects on the federal government and cantons

The Federal Council assumes that the introduction of individual taxation in the direct federal tax will result in an estimated loss of around 1 billion francs per year in revenue; This estimate refers to the tax year 2024. The federal government will cover around 800 million francs of this and the cantons will cover around 200 million francs through the cantonal share of the direct federal tax.

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Since individual taxation is to be implemented at all levels of government, the cantons must also adapt their laws. You are free to structure the tariffs and deductions. Therefore, the federal government cannot make any statements about the financial effects of the reform at the cantonal and municipal level. In any case, due to the complexity of the system change, a longer implementation horizon can be assumed. The template is therefore not reflected in the financial planning.

Effects on the burden ratios for direct federal taxes

It is estimated that the indirect counter-proposal will reduce the tax burden for a clear majority of taxpayers.

Under current law, unmarried people with children receive a privileged rate. Overall, this group of taxpayers has to expect a higher tax burden, which is, however, greatly cushioned by the increase in the child tax deduction and the tariff adjustments and, on average, compensated for for low and middle incomes.

For married couples with only one income or a low second income, the reform can lead to additional burdens due to the elimination of the married couple’s tariff and the halving of the child tax deduction; This particularly affects married couples with children in the middle and higher income classes.

The greatest relief comes for married people with a fairly even distribution of income between the spouses. This also affects many retired couples. Thanks to the adjustment of the tariff, most unmarried people without children will also be relieved.

Because individual taxation reduces the tax burden on the lower second income compared to today’s married couple taxation, the system change would create incentives to work and could therefore also lead to better utilization of the domestic labor and skilled labor potential.

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Counterproposal to the tax justice initiative

The Federal Act on Individual Taxation is intended to serve as an indirect counter-proposal to the popular initiative “For Individual Taxation Independent of Civil Status” (Tax Justice Initiative). The Federal Council is thus fulfilling the mandate of Parliament, which majority voted in favor of individual taxation as part of the legislative planning for 2019-2023. The Federal Council recommends rejecting the popular initiative because the same goal can be achieved more quickly with an indirect counter-proposal.

Parliament has until March 8, 2025 to make a recommendation to accept or reject the popular initiative. The deadline can be extended by one year if a council has previously passed a resolution on the indirect counter-proposal.

Address for inquiries

Adrian Grob, communications specialist
Federal Tax Administration FTA
Tel. +41 58 464 90 00, [email protected] (media inquiries only)

editor

The Federal Council

Federal Department of Finance

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