Swiss Federal Council proposes VAT increase to fund 13th pension

The Swiss Federal Council has recommended a value-added tax (VAT) increase to finance the implementation of the 13th Old-Age and Survivors' Insurance (AVS) pension. On November 29, Swiss voters will decide on a constitutional amendment that would raise the standard VAT rate from 8.1% to 8.5% and the hospitality rate from 3.8% to 4.0%. The reduced rate for essential goods, such as food and medicine, would remain at 2.6%.

This measure aims to secure approximately 1.5 billion Swiss francs annually to cover the rising costs of the 13th pension, which is expected to cost over 4 billion francs per year initially and exceed 5 billion by 2035. If approved, the new rates would take effect in January 2028.

Due to the shared VAT area, the decision will also automatically affect Liechtenstein. While the additional tax revenue in Switzerland is earmarked for the AVS, the funds in Liechtenstein will flow into the general state budget. Liechtenstein's retirees will not see changes to their existing pension structures, which have included a 13th pension since 1998.