20 Minutes.
A recently released report, put together by a group of experts, proposes measures to dissuade people in Switzerland maintaining high levels of debt, in particular home mortgages.
© Sebastian Czapnik | Dreamstime.com
The report says the current system encourages individuals to maintain unhealthy levels of debt.
The level of home mortgage debt in Switzerland is very high by international standards and has been rising over the last few years along with property prices.
Concerns for the financial sector
Mortgages make up more than 90% household debt in Switzerland. The report’s authors are concerned about the risks these high debt levels pose to the financial sector and the Swiss economy, in particular the impact of a sharp rise in interest rates, associated with a real-estate price correction.
International organisations have already sounded the alarm. The OECD and the IMF have made several calls for Switzerland to do away with tax incentives that encourage household borrowing and risk financial instability.
The suggested fix involves changing the Swiss system of imputed rent, an arrangement where home owner-occupiers pay tax on an additional sum of synthetic rent calculated based on their home’s floor area. The report suggests doing away with this imputed rent while removing the ability to deduct home mortgage interest from taxable income.
Been there, done that
Over the last few years, Swiss federal council attempts to change the system have met with resistance, either by parliament or the people. The federal council does not appear to have plans for another attempt right now.
The report was put together by a group made up of representatives from the federal department of finance, the federal department of the economy and the Swiss national bank (SNB), under the direction of the federal tax administration.
Read full 20 Minutes article (in French) – Take a 5 minute French test now
For more stories like this on Switzerland follow us on Facebook and Twitter.
Srenim says
Switzerland already has one if not the lowest levels of Ownership in Europe.
Not least due to the Iniquitous and Disgraceful Tax on the Theoretical Rental Value of the Property. You are taxed for living in your own home. Needs Scrapping.
And Banks encourage Owners to keep their Mortgages instead of paying them off because “Interest is Tax deductible”. But if you ask them to provide a guaranteed Investment using the retained cash that will pay a minimum of the Mortgage interest plus Tax on that income “Never”
And the stupidity allowing cash to be taken from Pension Funds to finance the Purchase which reduces future Pension etc.
A lot needs changing !