Mitte and SP Propose Significant Increase in Workers’ Payments

The Bold Plan to Expand AHV Funding in Switzerland: A Game-Changing Alliance

Two men, as different as can be, have come together with a revolutionary plan in Switzerland. Pierre-Yves Maillard, a prominent union leader and heavyweight of the Social Democratic Party (SP) from Vaud, and Erich Ettlin, a tax advisor and centrist politician from Obwalden, have forged an unprecedented alliance in the Senate’s Social Affairs Committee.

The Proposal: A Major Increase in Taxes

This proposal entails the most significant tax increase in decades. The plan is to raise the value-added tax from 8.1% to 9.1% and increase AHV payroll contributions from 8.7% to 9.5%. Initially, the working population and consumers would have to pay an additional 7 billion Swiss francs per year, which would later escalate to 9 billion.

The aim is to channel this revenue into the AHV. The centrist-left alliance led by Ettlin and Maillard has two primary objectives: financing the 13th AHV pension approved by the people a year ago and ensuring the funding for higher pensions for married couples, as demanded by the centrist party through an initiative – even before the public vote on the matter. The Senate is set to decide on the plan on Thursday.

The Implications for Individuals and Generations

The staggering sums involved raise questions about the impact on individuals, younger generations, and retirees. The Federal Council is pursuing similar plans, aiming to close the emerging holes in the AHV fund entirely through increased revenue, as decided in May. The Council rejects raising the retirement age, deeming it unpopular, and plans to source the additional revenue from payroll contributions and value-added tax, the primary revenue sources for the AHV.

Pensioners: Paying 550 and Receiving 3000 Swiss Francs

While precise calculations for individual households are unavailable, rough estimates can be made based on federal data on AHV and population trends. By 2035, with the higher pensions for married couples, the AHV’s deficit in pay-as-you-go financing is projected to reach 9 billion Swiss francs. To bridge this gap equally through VAT and payroll contributions, an additional 4.5 billion Swiss francs would need to be raised annually.

• Mehrwertsteuer (VAT) increase leads to an average annual burden of 550 Swiss francs per person.

Working Population: Paying 1350 and Receiving 0 Swiss Francs

For the younger generation, the burden increases with payroll contributions, resulting in an average annual increase of approximately 800 Swiss francs per person. The total burden on the working population would amount to an average of 1350 Swiss francs annually if the centrist-left alliance’s proposal is implemented.

The Impact of Value-Added Tax on Lower-Income Groups

The VAT increase disproportionately affects lower-income groups. Individuals with higher incomes bear a larger burden in absolute terms due to their higher consumption levels. However, lower-income households are more significantly impacted proportionally based on their income.

Extending Retirement Age: A Cost-Saving Measure

Increasing the retirement age by just one year to 66 could save the AHV approximately 3 billion Swiss francs annually. However, the Federal Council is resistant to this idea, citing public rejection of a similar proposal in the past.

Conclusion: Balancing Act for AHV’s Financial Stability

As Switzerland grapples with the challenge of securing the AHV’s financial future, a delicate balance between increased revenue and structural reforms is essential. While various options exist, such as a moderate VAT or payroll contribution hike combined with a retirement age of 66, the current political landscape suggests a different trajectory.