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Switzerland refuses to increase tax from capital revenue

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As Switzerland approved same-sex marriage, the Swiss also largely rejected a vague draft bill to tax rich people.

Every quarter, Swiss citizens can vote for laws to be implemented in the country. On September 26, Switzerland voted for and approved the “Marriage for all” initiative, making it one of the last European countries to legalize same-sex marriages.

But the Swiss electorate also voted about another proposition of law, a federal popular initiative called “Reduce tax on salaries, tax capital fairly“.

And all districts of Switzerland rejected it with a total of 65% of votes against the text. It accounts for 1.8 million votes against and 987,000 votes in favor of the proposed tax scheme.

Despite the defeat, the Young Socialist party, which submitted the law, wanted to remain optimistic as “for weeks, we managed to bring up inequities and fiscal justice at the center of public debate”, they tweeted after the results.

The initiative was also referred to as 99% and aimed at taxing revenue coming from capital and assets more than revenue from work. If passed, capital income above a certain amount would have got a heavier weight – a x1.5 multiplier – when calculating taxes.

But the text was vague. It didn’t define a threshold to apply the law, the assembly would have been charged to define it, nor did it clearly specify which revenue was considered as coming from capital.

Swiss banknotes
As Switzerland voted for the same-sex marriage, it also rejected a vague proposition of law for taxing capital revenue more than revenue from work

Switzerland, an average country in wealth gap scores

The federal assembly, which holds Switzerland’s legislative power, and the federal council called for voting against the initiative. If passed, the initiative would have been enforced despite their opinion.

They considered capital revenue was already heavily taxed. They also claimed it would negatively affect their economy, reduce incentive to spare and argued the country had already a rather good redistribution of wealth.

Based on the Gini Index, Switzerland ranks at the 65th position for wealth equality with a score of 0.705, positioning them in the first half of countries. With 0.902, the Netherlands is considered to have the largest wealth inequality in the world.

As for Switzerland’s neighbors, Germany is one of the most unequal countries in terms of wealth redistribution and is ranked 153 on the Gini Index. Austria is ranked 92, France is 57 and Italy 35.

According to the annual Global wealth report released by Credit Suisse in June 2021, total household wealth in the world grew the most in Switzerland with more than $50,000 US gain in a year.

Swiss rarely approve federal popular initiatives

It is the third initiative from the Young Socialist party that Swiss citizens reject in 8 years.

In 2013, the Young Socialists wanted salaries from the top management of companies not to exceed 12 times the wage of the lowest paid employees. In 2016, they issued another initiative about speculation on food prices.

Initiatives proposing to tax rich people in Switzerland have historically been rejected by the population. Moreover, the population usually approves only 10% of the popular initiatives presented to them.

The Young Socialists party also plans to propose another law that would consist of capping people’s assets to CHF 100 million (US $108 million) and invest the surplus to fight climate change.

Read more about Switzerland

Source
A European Parliament Resolution Approves Same-sex Marriages, Newsendip, September 2021, Free accessFederal Popular Initiative 'Reduce tax on salaries, tax capital fairly', Federal Council, September 2021, Free accessJS Suisse, Twitter, September 2021, Free accessInitiative populaire Impôt sur le revenu du capital, YouTube, Free accessWealth Inequality By Country 2021, World population review, Free accessLatin American Household Incomes Suffered the Most During the Pandemic, Newsendip, June 2021, Free access Switzerland Rejects Climate Laws, Newsendip, June 2021, Free accessTaxer les plus riches, une idée qui n’emballe pas les Suisses, Swissinfo, September 2021, Free access
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