Individual Taxation: Definition
In Switzerland, individual taxation is a system that allows each person to be taxed separately. This means that each person declares his or her own income and pays his or her own tax accordingly, while taking family circumstances into account.
This is not currently the case for married couples in Switzerland, who are taxed together as if they were a single person.
Current Context
At present, Swiss married couples are taxed together for direct federal income and wealth tax. This system adds together the incomes of both spouses and then subjects them to a progressive tax scale.
This measure is seen by many as unfair, which is why it is often referred to as the "penalization of marriage" since married couples often end up paying more tax than couples who aren't married.
Married Couples Tax Initiative Fails
In view of all these disadvantages, an initiative was launched to reduce the tax penalization of spouses in Switzerland. The proposal was to keep taxation on a joint basis, while ensuring that spouses were not disadvantaged in comparison with cohabiting couples.
This initiative was refused by the Federal Council, which instead wishes to introduce the 2027 reform, which would eliminate the calculation on a common basis, preferring individual taxation, regardless of marital status.
But without a new proposal to offset the financial losses the state would incur, the initiative was rejected.
2027 Reform
To remedy the "penalization of marriage", the Federal Council has presented an indirect counter-proposal to the initiative on taxes for married couples. With this reform, all Swiss citizens, whether they are married (or in a registered partnership) or not, will have to file their own tax returns, moving Switzerland towards a system based on individual taxation extended beyond single or cohabiting people.
Deductions for Children
The Federal Council has adjusted its counter-proposal to limit tax losses to one billion francs. Instead of a deduction of 12,000 francs per child, as initially planned, the ceiling will be set at 10,700 francs. The aim of this measure is to preserve a certain budgetary balance while taking into account support for families.
Joint Statement
Even if Switzerland moves to individual taxation, the counter-proposal still requires married couples to file a joint tax return. This decision was taken in particular to facilitate the payment of deductions for couples with children.
Tax Scale
However, the change in the tax scale was rejected. As we have seen, the 2027 reform will inevitably cost the state money. Changing the scale would have enabled the Confederation to halve the losses of a billion francs.
Debate and Controversy
The future adaptation of this reform divides Switzerland, with some political parties believing that it does not meet the needs of citizens sufficiently well.
Elimination of the "Penalization of Marriage".
A positive aspect of the individual taxation reform is the elimination of the "penalizing" aspect of marriage in terms of taxes. This rebalances the situation between married and cohabiting couples.
Single-Income Couples
For many, the current system discourages the 2nd spouse, who is often the wife, from working because of the increased tax progressivity. Indeed, the current Swiss tax system indirectly favors households with only one income. The new system would create greater equality between workers.
Opponents such as the Centre and the SVP are against this new reform precisely because they believe it would penalize married couples with a single income.
Administrative Complexity
Introducing a system of individual taxation would require a complete overhaul of the cantonal and federal tax systems, entailing high administrative costs and a complex transition.
Frequently Asked Questions
What is individual taxation in Switzerland?
Individual taxation is a system in which each person is taxed separately, regardless of whether they are married, cohabiting or single. Each person declares their own income and pays tax accordingly, taking into account their family situation.
When will individual taxation come into effect in Switzerland?
Switzerland plans to switch to individual taxation from 2027following a reform supported by the Federal Council. This reform will apply to all taxpayers, regardless of their marital status.
Why is Switzerland changing its tax system?
The main aim of the reform is to put an end to the penalization of marriage, an undesirable effect of the current system which can make married couples pay more tax than unmarried couples with equivalent incomes.
What is the criminalization of marriage in Switzerland?
Penalization of marriage refers to the fact that married couples, whose incomes are added together, often pay more tax than cohabiting couples with the same income. This is due to the progressive tax scale applied to a higher overall income.
Will married couples have to file two tax returns?
No. Even with individual taxation, married couples will continue to file a joint tax return. This will make it possible to distribute deductions more evenly, especially in the case of dependent children.
What will be the child tax deduction under the 2027 reform?
The Federal Council proposes a maximum deduction of CHF 10,700 per child, instead of the CHF 12,000 initially proposed. This limit is intended to avoid too great a loss of tax revenue.
