The case

The planned reform of individual taxation in Switzerland intends to replace the current joint taxation of married couples by individual taxation, thereby abolishing the so-called “marriage penalty”*, and it would increase the financial incentives for secondary income earners. The reform affects direct federal tax; the cantons would have to amend their tax laws accordingly.

*The higher taxation that results from the joint taxation due to the progressive tax rate.

Source: admin.ch & Swiss Press

The commentary

Tax relief for married couples with the same salaries: Married couples with similar incomes could benefit from the reform.

Example: A married couple with a joint income of CHF 200,000, evenly distributed, currently pays around CHF 6,733 in taxes. With the introduction of individual taxation, the tax burden would be reduced to around CHF 2,696, i.e. they would save CHF 4,037.

Higher tax burden for married couples with unequal incomes: Couples where one partner earns the main income might have to pay higher taxes.

Example: With an income of CHF 200,000, earned entirely by the main earner, the tax burden  currently amounts to around CHF 8,566. With the reform, the tax burden could increase to around CHF 11,321, i.e. an increase of CHF 2,755.

Effects on families with children: The child deduction for direct federal tax is increased from CHF 6,600 to CHF 12,000 and would be split equally between the parents if the new system was introduced. This could prove to be disadvantageous for families with only one income, as the non-working parent would not be able to deduct the full amount.

Impact on homeowners: In future, both spouses would have to pay tax on their respective share of the property. For example, in a 50:50 property split, each partner would pay tax on 50 % of the imputed rental value.

Financial impact: The Federal Council estimates that the reform would lead to a reduction in revenue of around CHF 1 billion per year, of which around CHF 800 million would be at the expense of the federal government and CHF 200 million to the cantons. According to federal estimates, around 14 % of all taxpayers would have to pay higher taxes than they do today. Traditionally organised households with one main earner would be more burdened with significantly higher taxes in some cases. Using the same example as above: A traditionally organised couple (ratio 100:0) currently pays around CHF 8,566 in taxes per year. Under the new system they would have to expect to pay CHF 11,321 in taxes, which would mean an increase of CHF 2,755. Single people and childless people with a good income would also have to pay higher taxes in some cases.

Criticism and alternatives: Critics have argued that the reform could lead to new injustices, particularly for single-earner couples with children. The Centre Party has submitted a popular initiative that comes up with an alternative tax calculation: In addition to joint taxation, an individual calculation would also be carried out and the couple would pay the lower of the two amounts.

This publication has been prepared solely for information purposes and is does not constitute a recommendation, a solicitation, or an offer. The information on which this publication is based has been obtained from sources that we believe to be reliable and in good faith, but we have not independently verified such information and no representation or warranty, express or implied, is made as to its accuracy. All expressions of opinion are made as of the date of publication and may be subject to change without notice. k-flash and all related affiliates accepts no liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this publication or any part of its contents. The use of this publication should not be regarded as a substitute for the exercise by the recipient of his or her own judgment. This publication is not directed to any person in any jurisdictions that prohibit such publication.