Council of States backs smaller VAT rise to fund Swiss army

Switzerland’s Council of States has approved a 0.2 percentage-point increase in value-added tax to help finance an additional 24 billion francs for the army, SRF reported. The proposal will now go to the National Council.

The chamber agreed that the Federal Council’s proposed 0.5 percentage-point increase would be unlikely to win approval in a nationwide vote. “The chances of approval are small, vanishingly small,” said Josef Dittli, a Council of States member from the Free Democratic Party.

Many members also said their confidence in the Defence Department had been badly damaged by recent revelations about the supposedly fixed price of a new army fighter jet. The price, they said, was anything but fixed.

The main dispute concerned how quickly the army should receive additional funding and how much debt it should be allowed to take on. The Federal Council wants to establish a new armaments fund that could borrow up to 6 billion francs to purchase military equipment. The Council of States’ security policy committee proposed raising that limit to 12 billion francs.

Baptiste Hurni of the Social Democratic Party called the proposal a blank cheque for an army he no longer trusted to use public funds properly. Franziska Roth, also of the Social Democratic Party, described the plan as dangerous because it would establish the fund next year while holding the vote on the VAT increase two years later.

Under the committee’s model, the fund could immediately take on 12 billion francs in debt without guaranteed financing. Roth warned that separating the fund from its financing could create a disaster of biblical proportions for the federal budget.

Representatives of the Swiss People’s Party, the Free Democratic Party and The Centre argued that the real danger would be failing to provide the army with substantially more money immediately. Brigitte Häberli-Koller of The Centre said the situation was serious and threatening.

Werner Salzmann of the Swiss People’s Party said additional arms purchases were urgently needed to maintain credible deterrence. Switzerland did not want to wage war, he said, but had to show a potential opponent that an attack would come at too high a price.

The Federal Council proposed financing the 24 billion francs through a 0.5 percentage-point increase in VAT. The security policy committee proposed a 0.2 percentage-point increase, with the remainder coming from the federal budget. The Council of States adopted the lower VAT increase.