The Finance Committee of the Council of States presents a broadly supported proposal for a more rapid increase in military spending. They aim to redistribute the recently introduced OECD minimum tax.
## A New Approach to Military Spending
### The Debate Over Military Budgets
The political landscape in Switzerland has been shaped by the conflict surrounding the Swiss Army budget since the beginning of the war in Ukraine. Parties such as the SVP, FDP, and Mitte have set a goal to increase military spending to 1% of the Gross Domestic Product (GDP).
### The Timeline Dispute
There is a dispute over the timeline, with some advocating for reaching the goal by 2030, while others prefer a more gradual approach until 2035. Despite the seemingly small difference, the stakes are high, with a difference amounting to billions of Swiss Francs. At present, there is no realistic plan for the ambitious 2030 target, while the 2035 timeline is deemed too late by military leaders and conservative security policymakers, leading to hardened positions.
### A Compromise Proposal
In response to this deadlock, the Finance Committee of the Council of States has put forward a new proposal, with its president Jakob Stark (SVP) presenting it to the media on Tuesday evening. The proposal suggests setting the year 2032 as the new target for the Parliament, aiming to provide a middle ground that could end the deadlock and offer the military more planning certainty. This variant was supported by a broad majority in the committee (with a vote of 10 to 1 and 3 abstentions).
## Revenue Reallocations and Controversies
### Funding the Military Increase
The committee’s proposal goes beyond a simple delay, offering a new approach to financing, which is likely to stir controversy. Financial policymakers argue that even with a two-year extension, it is not feasible to fund the military rearmament solely through cuts in other areas. Therefore, they propose generating additional revenue. While an increase in the value-added tax is already under consideration, it may face challenges at the ballot box.
### Reallocating OECD Minimum Tax Revenue
To address this issue, the committee suggests redirecting a larger portion of the revenue from the OECD minimum tax, introduced this year, to the federal treasury at the expense of the cantons. Currently, cantons retain three-quarters of the taxes from “their” companies, with one-quarter going to the federal government. The committee aims to establish a new distribution key of 50:50. This reallocation would primarily affect cantons with many international corporations, such as Zug, Basel-Stadt, or Luzern.
### Financial Projections
While the exact revenue from the new tax is uncertain, the committee anticipates an additional 400 to 700 million Swiss Francs for the federal government in the medium term. Half of this amount would be allocated to the military, leaving some funds for other purposes, potentially garnering support from the left.
### Kantonal Resistance and Political Dynamics
While appealing to the federal government, the proposal is likely to face strong opposition from the cantons. The current distribution key resulted from intense negotiations and was part of the referendum package that approved the tax last year. It is noteworthy that the proposal originates from the Council of States, known as the “Chamber of Cantons.” Senators were instrumental in securing the current distribution key during the OECD tax negotiations, overcoming resistance from the National Council.
### Potential Challenges and Compromises
The unorthodox proposal’s fate will be determined in December during the budget debate, where Parliament will decide whether to align military spending growth with the 2030 or 2032 target. Additionally, the Council of States will make an initial decision on the distribution key for the OECD tax.
## Budget Adjustments and Sectoral Cuts
### Budget Adjustments
Both chambers of Parliament are inclined to significantly increase the army budget for the next year, from the current 5.7 billion to 6.4 billion Swiss Francs. In exchange, the finance committees plan to reduce spending, particularly in development aid, federal administration, and asylum. The extent and allocation of these cuts are contentious, with the National Council considering a much larger reduction in development aid compared to the Council of States (250 million versus 30 million).
In conclusion, the proposal put forward by the Finance Committee of the Council of States offers a potential compromise in the ongoing debate over Swiss military spending. By proposing a new timeline and revenue reallocation strategy, the committee aims to break the deadlock and provide the military with more certainty in planning. However, the proposal is likely to face resistance from cantons and challenges in implementation, highlighting the complex dynamics of Swiss fiscal policy.
## FAQ
### What is the proposed timeline for increasing Swiss military spending?
The Finance Committee of the Council of States suggests setting the year 2032 as the new target for reaching 1% of GDP in military spending.
### How does the committee propose to finance the military increase?
The committee recommends reallocating a larger portion of the revenue from the OECD minimum tax to the federal government, potentially generating additional funds for the military.
### What are the potential challenges and controversies surrounding the proposal?
The proposal is likely to face resistance from cantons, as it involves changing the distribution key for tax revenue, which was established through intense negotiations and a previous referendum. Additionally, the proposal may encounter hurdles in implementation and political opposition.