Switzerland’s government plans to raise value-added tax (VAT) temporarily to finance a substantial increase in military and security spending. The Federal Council wants to raise an additional CHF 31bn over ten years through a 0.8-percentage-point increase in VAT. A detailed proposal is due in March.
According to the defence minister, Switzerland is ill-prepared for an international conflict and could itself become a target. Only about one-third of the armed forces is currently adequately equipped to defend the country. Although defence spending is set to rise to 1% of GDP by 2032, the government concedes that this will not be enough to meet all security needs, even after the army revised its priorities.
To avoid straining the federal budget, new revenues are deemed necessary. The additional money from higher VAT would amount to roughly CHF 2.2bn in 2028 and between CHF 3bn and CHF 3.6bn annually from 2029 to 2038.
The least harmful option
The government has opted for a temporary VAT increase, arguing that it would be less damaging to the economy and society than alternative measures. It has ruled out higher payroll taxes, other tax rises, cuts to the armed forces, a loosening of the debt brake or offsetting savings elsewhere.
Ministers acknowledge the burden on households but argue that security underpins political freedom, prosperity and democracy.
Weapons first
The additional revenue would be channelled into a dedicated armaments fund, also supported by the regular defence budget. The fund would be allowed to borrow, provided all debts are repaid by 2038.
Spending would focus primarily on weapons procurement, particularly to address critical shortfalls related to hybrid warfare and long-range attacks, which officials consider the most likely threats. But costs are rising fast. Prices for military equipment have increased sharply—by as much as 40% in some cases—owing to inflation and surging global demand.
Long delivery times pose another challenge. Switzerland is not a priority customer and must secure production slots early and pay advance instalments.
Cost pressures are also affecting the F-35 fighter-jet programme. Total costs are now expected to exceed earlier estimates. The government has already abandoned plans to purchase the originally envisaged 36 aircraft and says a revised decision will be taken in the coming months.
Voters to have last word
The defence ministry will submit the proposal for consultation by the end of March, with parliamentary debate expected in the autumn. Because a VAT increase requires a constitutional amendment, voters will have the final say, probably in the summer of 2027. If approved, the tax rise would take effect in 2028.
The plan has already met resistance across much of the political spectrum, from the left to parts of the right. The Centre Party supports the proposal, while the Greens’ Liberals remain undecided. The defence minister nonetheless expresses confidence that voters will back the measure.
If adopted, it would be the largest VAT increase since 1999. The most recent rise, which took effect in January 2024, lifted the standard rate from 7.6% to 8.1% to help finance pensions. Another increase, intended to fund a 13th annual pension payment, is still under discussion in parliament.
Rolling back taxes is often harder than raising them. Switzerland, however, offers a rare counter-example. In 2011 the standard VAT rate was increased by 0.4 percentage points to shore up disability insurance. The rise was explicitly temporary. When voters rejected plans in a 2017 referendum to repurpose the extra revenue, the surcharge was duly removed and the rate reverted to its previous level of 7.7%.
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