Over time, salaries increase with inflation. However, if tax deductions and allowances are not adjusted the percentage of income taken in tax rises, a phenomenon known as tax creep or fiscal drag. Given recent inflation, Switzerland’s federal government announced this week that it was increasing allowances and deductions, reported SRF.
From 2025, the child and support allowances will rise from CHF 6,700 to CHF 6,800. And married couples will start paying federal taxes when their combined annual income reaches CHF 29,700 instead of the current level of CHF 29,300. Those investing in career training will be able to deduct up to CHF 13,000, CHF 100 more than today.
The sums are small, but the government is at least sending a signal that it is concerned about being up front and transparent.
A number of nations, such as the United States, Austria, Canada, Denmark and Israel automatically increase tax thresholds in line with inflation or wage growth. Many others, such as France, Germany, Belgium and Sweden take a haphazard approach. Others such as the UK, Australia, Japan, China, New Zealand and most other countries have nothing in place to account for the impact of inflation on taxation on tax brackets.
The UK government has openly stated a plan to freeze tax brackets as a way to increase taxation. Freezing tax brackets is expected to bring in an extra £33.5 billion in stealth taxes a year by 2028/29, according to the UK government.
More on this:
SRF article (in German)
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