An Unholy Alliance Opposes the Referendum Proposal on Imputed Rental Value. The Business Federation Disagrees.
Investing in the maintenance of their homes rewards owners with tax deductions.
Is this still pragmatic or already cynical? On Tuesday, a colorful alliance appeared before the media in Bern, deserving the title “unholy.” Representatives from the construction industry sat alongside leaders of the SP and the Greens to explain why they oppose the proposal to abolish the imputed rental value, which will be voted on at the end of September.
The alliance is unholy because the “partners” involved reject the reform not only for different reasons but also for opposing reasons. On one side are three business associations representing sectors like building technology, planning, construction, and renewable energies (Bauenschweiz, Suissetec, AEE Suisse). They fear a “renovation freeze” if the reform goes through. Houses would lose value, the construction industry would lose contracts and jobs.
The background: If the reform is accepted, the imputed rental value would no longer be taxed, but deductions for property maintenance costs would also be eliminated, among other things. According to the associations, this would have drastic consequences: “Many people will no longer be able to afford the renovation of their own home.” This would also jeopardize energy and climate goals. At the same time, the reform would promote undeclared work because those who can no longer claim deductions would not need proper documentation.
Business Federation Supports the Reform
In other words, the construction industry believes that many owners will invest less money in their homes or apartments if they are no longer able to deduct these expenses from their tax returns – meaning a significant portion of building maintenance is currently tax-motivated.
The problem is further exacerbated from the industry’s perspective because owners are likely to allocate more money in the future to pay off their mortgages faster. Indeed, a stated goal of the proponents is to improve the stability of the real estate market and reduce incentives for debt. Deductions for interest payments would be greatly restricted, encouraging owners to reduce their mortgages.
Not everyone in the affected industries sees this as a problem: The Business Federation has expressed its support for the proposal with a “clear majority.” They believe that owners would still be interested in maintaining their properties and investing enough even without tax deductions – especially since they would have more financial flexibility due to the elimination of the imputed rental value. The Business Federation also notes that cantons can continue to allow tax deductions for energy-efficient and environmentally friendly investments.
In the future, homeowners may no longer deduct maintenance costs but also no longer have to pay imputed rental value taxes.
Leftists Fear High Tax Revenue Loss
At the colorful anti-alliance media conference on Tuesday, Cédric Wermuth and Lisa Mazzone sat at the other end of the podium. Their parties, SP and Greens, have played a significant role in the decisions that the construction industry now vocally criticizes: The Left has always advocated for the elimination of tax deductions related to homeownership in the abolition of the imputed rental value.
As much as the SVP, FDP, and Center would have liked to pass a proposal that would be (even) more attractive to owners, they did not do so primarily for one reason: After many failed attempts, they had to assume that the Left could easily thwart an unbalanced proposal.
What concerns the Left are not the worries of the business sector, but the anticipated tax revenue losses. “Very few” would benefit from the system change, and for the much-mentioned middle class, the SP and Greens predict “significant tax increases.” For them, the reform is particularly misaligned at the federal level: in the coming weeks, the Federal Council will send its major relief program to Parliament – at the same time, a tax proposal will go to the vote, causing “billion-dollar losses.”
Interest Rates Matter
According to official federal data, there are indeed expected tax revenue losses. Assuming current mortgage interest rates, homeowners could collectively expect relief of approximately 1.8 billion Swiss francs per year (federal, cantonal, and municipal governments combined). Of this, around 320 million would be attributed to the federal government. If interest rates continue to decline, the losses will be greater. However, if interest rates eventually rise again, the reform may no longer be appealing to many homeowners. At 2.8%, the system change would be roughly neutral according to the federal government. Some owners may still benefit, but many may end up paying more than they do now.
Returning to the media conference on Tuesday: In the middle between the SP and Greens and the construction industry sat Pascal Broulis, FDP Senator and former Finance Director of Vaud. Unlike the FDP Switzerland, he opposes the reform. He primarily warned of the consequences for the severely affected mountain and tourism cantons. In short, there is no shortage of opponents to the reform. According to initial surveys, it could have a chance, but the debates are just beginning.