Inheritance tax initiative roundly defeated

The inheritance tax would have applied to estates and bequests of over CHF2 million Keystone

An attempt to federalise Switzerland’s inheritance tax system and redistribute wealth by taxing legacies worth more than CHF2 million ($2.15 million) has been rejected by Swiss voters, as expected.  

On Sunday, 71% of voters and all 26 Swiss cantons rejected the proposal.

As a result, with its initiative to “tax millionaires’ legacies to fund old age pensions”, the political left has continued its losing streak at the ballot box. In the past two years voters have rejected pay caps within companies, the introduction of a nationwide minimum wage and a plan to scrap lump sum taxation for rich foreigners. 

Supporters of the latest initiative, which applies only to estates and gifts over CHF2 million at a basic rate of 20% but allows for exceptions for company property, had argued that this would be fairer. They pointed out that in Switzerland wealth is increasingly concentrated in the pockets of a few.

Two-thirds of the revenue from this new tax, projected at CHF3 billion a year, would have been credited to the nation’s old age pension fund, with the remaining third going to the cantons to compensate them for the loss of their inheritance tax revenue, which currently generates about CHF1 billion a year.  

The initiative’s backers had also argued that since the pension system is a federal issue, the funding mechanism should also be at a federal level, not cantonal as at present. 

In a nutshell: inheritance tax

Launched by the centrist Protestant Party and supported by the leftwing Social Democrats, Greens and trade unions, the initiative wants to reform taxation of inherited fortunes and gifts, transferring the power to tax from the cantons to the federal level. 

The proposed tax would apply only to estates and gifts over CHF2 million, at a rate of 20%. The rate would be less for those who inherit businesses and farms and keep up the activity for ten years at least. 

Bequests and gifts to a spouse or “registered partner” would be exempt, as also gifts up to CHF20,000.

‘Clear sign’

However, a relieved Peter Hegglin, president of the Conference of Cantonal Finance Directors, said the result was a “clear sign” that voters didn’t want to shift responsibility to the government and wanted to continue to be able to decide on inheritance tax at a cantonal level.

Monika Rühl, president of the Swiss Business Federation, economiesuisse, which had also recommended voters reject the proposal, said the organisers of the initiative were partly to blame for the clear defeat. 

By leaving the size of the tax exemptions open in the text of the initiative and then during the campaign mentioning increasingly high figures, they ended up confusing themselves, she said. 

“As a result it became clear to the public that there was uncertainty regarding the size of the exemption,” Rühl told the Swiss News Agency after the result became known. 

“We were also able to show that a Yes would have threatened small and medium-sized businesses.” 

Several politicians and media described the tax as a “KMU Killer”, referring to the German abbreviation for small and medium-sized businesses, which employ more than three-quarters of the Swiss workforce. 

Businesses said it would have been an effective double tax on income since firms already pay tax on earnings. Supporters of the plan countered that the overall tax burden in Switzerland is still one of the lowest in Europe.  

Switzerland’s cabinet, both houses of parliament and all 26 cantons had recommended voters reject the proposal, as did the main business lobbies.  

Vote June 14, 2015

Four separate issues feature on the ballot sheet on June 14:

A proposal, supported by the centre-left, to introduce a nationwide inheritance tax, was rejected.

A constitutional amendment to allow the genetic screening of IVF embryos was accepted.

An initiative to harmonise student grants across the country was rejected.

A referendum against a parliamentary decision to reform the funding of public radio and television was accepted.