OECD urges Switzerland to raise VAT and build more homes

The Organisation for Economic Co-operation and Development is calling on Switzerland to increase value added tax, expand housing construction and strengthen competition, while praising the country’s robust economy. SRF reported that the OECD also warned of rising public spending linked to an ageing population, healthcare and defence.

Switzerland’s economy grew by 1.6 per cent in 2025. The OECD forecasts growth of 2.0 per cent in 2026 and 1.4 per cent in 2027. Inflation and unemployment are expected to remain low, with domestic demand continuing to support growth.

Higher revenues and pension reform

To comply with the debt brake over the long term, the OECD says Switzerland needs additional revenue and reforms. It recommends increasing value added tax by more than currently planned, regularly reviewing public spending and improving efficiency in healthcare.

The organisation also wants Switzerland to secure the long term financing of pensions. It recommends gradually linking the statutory retirement age to rising life expectancy after 2035, which it says would limit spending pressures caused by demographic change.

Housing supply falling behind demand

The OECD considers the housing market a particular problem. Affordable homes are becoming increasingly scarce in cities and tourist regions because construction is not keeping pace with demand.

It identifies complex building rules, high construction costs and lengthy approval procedures as key obstacles. In some cantons, approving a building permit can take almost 500 days. The OECD recommends harmonising building regulations between cantons, introducing digital procedures and using new technology to speed up approvals.

It also calls for changes to rent regulation. The growing gap between existing and newly agreed rents could mean that housing is not being used efficiently, the OECD says. It recommends linking rents in existing contracts more closely to local market rents.

The organisation also wants property taxation to be reconsidered. More frequent property revaluations and higher taxes on unused or underused housing could help make better use of the existing supply.

Less bureaucracy and more competition

The OECD says Switzerland’s regulatory obligations under federal law have increased by 50 per cent over the past decade. Only Iceland, Japan and Turkey have higher levels of regulation, according to the report.

Companies pay about 1,114 Swiss francs per employee each year in levies, fees and permits. Small and medium-sized businesses and start-ups are particularly affected, the OECD says. It recommends simplifying and harmonising rules, including in construction, where many different regulations and authorities are involved.

Further reforms should reduce bureaucracy, lower non-tariff trade barriers and increase competition in regulated markets. The electricity market in particular has potential for productivity gains, the OECD says. Structural reforms could significantly increase gross domestic product per person over the long term.