The Swiss government wants to raise value-added tax to pay for the 13th annual payment of the old-age and survivors’ pension, known as AHV in German and AVS in French. On Monday the Federal Council came out in favour of lifting the standard VAT rate by 0.4 percentage points, from 8.1% to 8.5%. Voters will settle the question in a referendum on November 29.
The extra instalment, which gives pensioners a thirteenth payment each year, is due to be paid from December 1, and it carries a large bill. According to the Keystone-SDA news agency, it will cost CHF4.2 billion ($5.06 billion) in 2026. The annual figure is expected to climb to about CHF4.5 billion in 2030 and CHF5.4 billion in 2040. The proposed VAT increase would bring in CHF1.5 billion a year.
The financing model has been through several rounds in Bern. The Senate had backed a mixed approach, but parliament in the end chose VAT as the only source of money and rejected a parallel rise of 0.2 percentage points in employees’ contributions. Not every rate would move by the same amount. The reduced rate, which covers everyday items such as food, stays at 2.6%, while the special rate for hotels and other accommodation would go up by only 0.2 points, from 3.8% to 4%.
Because the change concerns tax rates set in the constitution, it needs a double majority to pass. That means the proposal must win a majority of the votes cast nationwide and also carry a majority of the cantons. The Federal Council’s recommendation gives the yes side the formal backing of the government going into the campaign.
Even a yes vote would not close the gap for good. The government accepts that the higher VAT rate will not be enough in the long term, and its AHV2030 reform proposal already includes a scenario for additional funding for the 13th pension. That plan has drawn criticism from both the left and the right, so the argument over how Switzerland pays for its pensions is set to continue after November 29.
