The extra sausage provides the next extra round in the rental value

The sobering news: on Thursday the Council of States also failed to convert the problem child of the imputed rental value into a proposal that could achieve a majority. He even insists that the imputed rental value should not be abolished everywhere. The current taxation should continue to apply to second homes.

This is because otherwise the mountain cantons in particular would face a major loss of income. And that drives these cantons on their hind legs. “If we want to get the bill passed, we should not turn the tourist cantons against us now,” says Hannes Germann (SVP/TG). But: An extra sausage for the cantons with many second homes will meet with a lot of resistance. The imputed rental value remains a problem child.

This is in fact “probably the most important reform of Swiss income tax law in the last ten years,” as Pirmin Bischof (center/SO) explained on behalf of the committee. In fact, everyone wants to abolish the unpopular tax, the only question is under what conditions.

The members of the Council of States have only very limited influence on one of the most important factors: the amount of mortgages. The lower these are, the more private individuals benefit from a system change away from the imputed rental value. Or read the other way around: the greater the losses for the public sector.

If interest rates rise, the cantons are more likely to participate, but at the same time the financial benefit for property owners is limited. At the moment, it was said during the debate, mortgage rates are about at the point where both cantons and homeowners can agree. Following the National Bank’s interest rate decision, mortgage interest rates will probably fall again in the near future.

At the same time, the Council of States wants debt interest deductions to be allowed in the future up to an amount of 70 percent of the taxable investment income. The National Council wanted to limit this to 40 percent. The larger this percentage, the less incentive there is to pay off the mortgage debt.

Creating more incentives was originally a core part of this proposal. Switzerland already has a very high private debt per capita. This is also because it is often not attractive from a fiscal perspective to pay off the debts – even if you have the necessary money.

Carlo Sommaruga (SP/GE) campaigned in vain for consistent system change. One from which no interest on debts can be deducted. Ultimately, Sommaruga says, deductibility is just a “tax subsidy for the rich” anyway. The Federal Council, on the other hand, is in line with the Council of States and wants large parts of the debt interest to remain deductible. This “also limits incentives for private debt,” as Finance Minister Karin Keller-Sutter explained.

It is more than doubtful whether the National Council will agree to this in the next round of discussions. After all: the responsible committee of the Grand Chamber is currently busy cobbling together a solution to the problem with second homes. It has launched a commission initiative that allows cantons and municipalities to levy a special property tax on second properties that they use themselves.

But it will take several years before that happens and a referendum will also be necessary. It is therefore very questionable whether the imputed rental value will be abolished in the foreseeable future. It is a lesson for all involved that the project has already failed twice at the ballot box.

The problem child remains a problem child. Although everyone sees the potential for reforms, Parliament has been debating for six years how to put them on the right track. The councils no longer have many rounds of negotiations. Otherwise, the arrest quickly turns into a practice cancellation.