The case

Today’s debate in the Council of States on the 2025 federal budget has raised key questions about Switzerland’s future financial policy. The tense budgetary situation shows how difficult it is going to be to cover growing expenditure without violating fundamental principles such as the debt brake.

Source: Parlament 

The commentary

The 2025 budget can only be balanced by means of massive relief measures and optimistic revenue estimates. Further, some of the expenditure is deemed as extraordinary (e.g. to support refugees with S status). Still, the long-term pressure remains, particularly due to rising costs for the pension scheme (AHV) and the army.

This is the reason why the Finance Committee of the Council of States has proposed to redistribute the revenue from the OECD minimum tax in order to provide more funds for the army, which would mean that the cantons would have to forgo a larger proportion of their revenue. This is controversial as the distribution formula was determined only a short while ago. The President of the Finance Committee of the Council of States considers the adjustment of the distribution key legitimate, as financing the army is of national interest. However, critics might argue that this adjustment could affect the federal balance and trust between the Confederation and the cantons.

Tax increases may also soon be required in order to balance the structural deficit of over CHF 3 billion per year from 2027. Yet, tax increases will be highly contested politically as they will most likely trigger resistance from the population and the economy. See also flash “Bad and not so bad taxes”

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