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On September 25, 2022, the Swiss people approved the AHV 21 reform. For this reason, we also agreed to increase the value added tax (VAT) at the beginning of 2024. So what impact does an increase in taxes have on our finances?
How much will VAT increase?
The referendum will result in the federal government increasing VAT rates from January 1, 2024. The increase was 0.4 percent and 0.1 percent, respectively. The standard rate will now be 8.1 percent (previously 7.7 percent), the special rate will be 3.8 percent (previously 3.7 percent), and the reduced rate will be 2.6 percent (previously 2.5 percent).
How strongly do I feel about the increase in my weekly purchases?
VAT is perhaps what catches our attention the most during our weekly shopping trip to stock the refrigerator. Coop, Migros and Co. clearly states the tax on the receipt. An increase of 0.1 to 0.4 percent will not surprise you much. If you buy 100 francs, you will only pay 10 to 40 piastres more.
Even better: It’s quite possible that retailers won’t pass on the VAT increase to customers at all. “Due to competitive pressure in the retail sector, we assume that many retailers will not pass on at least part of the additional costs to end customers,” explains Dagmar Jenni (55), director of the Swiss Retail Federation. The situation was the same with other price increases in the past.
Where will the VAT increase affect me the most?
Unlike your weekly shopping spree, you can already feel the VAT increase on larger purchases. “The tax increase is most likely to be felt on larger purchases such as e-bikes or cars,” explains Benno Suter (53), head of VAT consultancy Ernst & Young in Switzerland.
For example: When buying a second-hand car with a used value of 10,000 francs, VAT is no longer 770 francs but 810 francs. Retailers can add this 40 francs.
Who doesn’t add VAT?
Basically, you can assume that in highly competitive industries, companies will pay the increase out of their own pockets. “There are retailers in the retail sector who are personally responsible for the increase. For example, Aldi reported this at the end of September 2023,” explains Dagmar Jenni.
Swisscom also decided to cover the tax increase for its customers. The psychology of pricing is another factor. If the selling price is a limit price (e.g. 99 francs, 11.95 or 7.99), dealers will not increase it much.
Can I control the increases?
It is possible for sellers to secretly increase their prices even further, taking advantage of the increase in VAT. To avoid these hidden adjustments, price monitor provides a VAT calculator to the public.
You can use this calculator to determine whether a price has actually been increased “solely” due to increased VAT. You can find the VAT calculator under this link on the price monitor website. If you observe a hidden price increase, you can report it using the online form.
Which VAT rate will I pay and when?
The state distinguishes between three different sales taxes. The reduced rate applies to “everyday items”. These are mainly food, newspapers, books and medicine.
There is also a special price application for accommodation. This only applies to hoteliers. All remaining taxable benefits are subject to the standard rate. For example, clothes, mobile phone subscription or visit to the hairdresser.
How important is VAT for Switzerland?
VAT is the second most important source of federal revenue after direct federal tax. According to the federal government’s calculations, 32.7 percent of revenue will come from VAT in 2024. The additional revenue of 12.4 billion francs is expected to ease the burden on the AHV by 2032.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
