In a bid to curtail the large number of people who cross the border to do their shopping in Germany, the Swiss government is drawing up plans to halve the value of goods that can be taken to the alpine nation VAT-free, sources close to the Federal Council have revealed. Officials said they want to end the “subsidisation of shopping tourism” by making people pay more tax.

The Swiss spent 8 billion francs a year shopping abroad

Currently, anyone who does their shopping in Germany is able to bring between 50 and 300 francs-worth of goods per person per day across the Swiss border without having to declare their items or pay value-added tax (VAT). They are also allowed to reclaim the German value-added tax - currently set at a rate of 19 percent - on goods if they so desire through an export certificate. 

This means that purchases can be completely free of both Swiss and German value-added tax, which makes goods even cheaper to buy in the federal republic than they already are. This is perhaps why, according to the Tages-Anzeiger, the Swiss spend more than 8 billion francs a year shopping abroad, providing a boon for the economies of Baden-Württemberg and other border regions.

VAT-free limit on German shopping to be halved

Now the Federal Council are drawing up plans to cut the VAT-free limit down to 150 francs per person per day. Any goods imported over that value will be subject to the standard VAT rate in Switzerland - 7,7 percent for general goods and 2,5 percent for foodstuffs. While still in the planning phase, the government is expected to put the idea to public consultation in the coming weeks.

The newspaper noted that the plans have been in the pipeline for a while, but were previously rejected as officials did not think the rule could be enforced - former Federal Councillor Ueli Maurer once described the plan as “Mission Impossible.” Now, with the launch of the Quickzoll App - which tracks purchases and is able to determine and charge shoppers the appropriate amount of VAT without having to be stopped by police - they hope that the policy will be easier to control.

Swiss retailers argue they are being undercut by German stores

The plan is meant to satisfy demands from Swiss supermarkets and other retailers in the border regions, which argue that the current system puts them at a huge disadvantage. Alongside having to pay higher salaries and rental costs, Swiss stores are undercut by German prices that are made even lower by a scheme that only benefits goods travelling from Germany to Switzerland, not the reverse.

The announcement has gone down well with said companies, with Swiss Retail Federation director Dagmar Jenni announcing that they “are glad that the unequal treatment of shopping tourists and Swiss customers when it comes to VAT is finally being addressed.” He added that the alpine nation should go one step further and reduce the VAT-free limit to just 50 francs per person.

Officials from eastern cantons also voiced their support for the plan, with Thurgau economics director Walter Schönholzer telling the Tages-Anzeiger that it was a “step in the right direction”. National Councillor Kurt Egger said he was relieved and “glad that something is finally being done.”

Swiss consumer foundations criticise VAT reforms

Not all are so enthusiastic though, with Consumer Protection Foundation spokesperson Sara Stadler saying the idea was “fighting [the] symptoms”, not the core problem of higher prices in Switzerland. She argued that, for the sake of families and individuals hit with the rising cost of living, the VAT-free rate should be reduced by less.