At a press conference, the Federal Council unveiled its plan to reform the tax system in Switzerland. The government hopes to eliminate the so-called “marriage penalty” by allowing married couples to file their tax returns separately.

Explaining the marriage penalty in Switzerland

Under the current rules, anyone who is married in Switzerland must file their tax returns jointly with their spouse. If both spouses have a job, their incomes are added together when calculating income tax.

Critics argue that the current system creates a “marriage penalty”, as working married couples end up paying more in tax than working couples who are not married, as they can file their returns individually. Many make the point that the current system is outdated as it assumes only one of the partners will work, and while some limited tax deductions exist for married couples, they nowhere near compensate for the higher tax burden.

Swiss government moves to scrap joint tax filing

In a statement issued on February 21, the Federal Council announced that they want to scrap jointly filed tax returns, eliminating the marriage penalty. The plan is a counter-proposal to the Tax Justice Initiative - a referendum that seeks to achieve the same goal.

Under the plans, married couples would file their taxes individually rather than jointly, which would allow them to benefit from lower rates of income tax. For tax purposes, the income and assets of married couples would be divided in the same way as unmarried couples and certain tax breaks such as the child deduction would be increased.

What’s more, the Federal Council announced that it would be modifying federal income tax rates. Under the plans, the basic tax allowance will be increased and the income threshold for paying the top rate of federal tax (11,5 percent) will be reduced.

Swiss government hopes tax reform will boost employment

Speaking at a press conference on February 21, Finance Minister Karin Keller-Sutter said that she hoped the reform would encourage married people, especially women, to (re-)join the workforce, adding that it may go some way to fill the high demand for workers in Switzerland. The Federal Council noted in the statement that the plan “will reduce the tax burden for a clear majority of taxpayers”, especially married couples who earn similar salaries.

The announcement was warmly received by parts of parliament, with FDP National Councillor Susanne Vincenz-Stauffacher telling 20 Minuten that she was delighted by the plans and that she looked forward to discussing the firmer details. FDP. The Liberals, Greens, Green Liberals and the Social Democratic parties are all in favour of the plan.

Many hurdles still to overcome for Swiss tax reform

However, while both parliament and the Federal Council are in favour of the change, Keller-Sutter spoke of a “bureaucratic monster” that had to be faced to make the plan a reality. For the proposal to be successfully implemented, tax law would have to be modified at the federal, cantonal and local levels.

The plans could also be scuppered by referendum and defeat in parliament, with the Swiss People’s Party and the Centre both coming out against the reform. Keller-Sutter herself noted that after a consultation, only five of the 26 Swiss cantons were in favour of the change, mainly because the Federal Council estimates it would cost 1 billion francs a year in lost tax revenue. 

She said that the cantons have asked for 10 years to make the change happen. “Even if we passed this law today, it wouldn't come into force before 2034... it probably won't be before at least 2035 or 2036,” she concluded.