Switzerland mulls VAT increase to finance pension hike

Switzerland’s government announced on Wednesday that it prefers raising the country’s value-added tax (VAT) rather than increasing wage contributions to fund a recent pension increase.

Due to a calculation error in setting the national pension fund’s deficit, an additional 3 billion francs ($3.5 billion) will be available in 2033. This means that higher VAT is sufficient to cover the pension shortfall. Switzerland’s current VAT rate is 8.1 per cent, one of the lowest in Europe.

The final decision on the VAT increase will be made in the autumn based on updated pension fund data. Swiss voters will need to approve the VAT hike in a referendum, and opponents may challenge other aspects of the plan through a plebiscite.

Attribution: Bloomberg

Subediting: Y.Yasser