Parliament has agreed to tax breaks for married couples to do away with long-standing tax discrimination in Switzerland.This content was published on October 5, 2006 - 19:07
Under the new measures, in cases where both husband and wife work, up to a maximum of SFr12,500 ($9,975) of their joint income will be tax deductible.
An additional tax allowance of SFr2,500 will be granted to all married couples to prevent new tax differences between households with two wage earners and those with just one.
The House of Representatives voted on Thursday to support these new reforms, thus backing an earlier decision by the Senate.
The measures, which will come into force from 2008/9, will affect an estimated 160,000 of the 240,000 couples who suffer from tax discrimination.
For over 20 years the Federal Court has criticised the unfair fiscal system for married couples in Switzerland. Under the current system, a married couple has to pay tax as a single entity. In cases where both husband and wife work, incomes are added together and taxed jointly rather than individually, as is the case for couples that live together.
Up to now, direct federal taxation has penalised working married couples. For example, in a couple where the man has a taxable income of SFr60,000 while his partner earns SFr40,000, if the couple are not married, the man pays taxes of SFr849 and the woman SFr284 - a total of SFr1,133 per year.
If this same couple are married, they pay tax on their combined income of SFr92,400 (SFr100,000 – SFr7,600 tax deduction) - which adds up to a total of SFr1,969.
The financial impact of the new measures, which will result in SFr650 million less tax income - SFr540 million for the federal government and SFr110 million for the cantons - received criticism from some sides of parliament. Members of the Green Party and the Social Democratic Party criticised what they called a "huge loss".
Ruth Genner, a Green Party parliamentarian, also argued in favour of individual taxation, regardless of whether the person is married or not, which she called the "only fair system".
But Charles Favre, from the centre-right Radical Party praised the fact that the measures could be swiftly applied, and Bruno Zuppiger, of the rightwing Swiss People's Party, denied that the costs were too heavy.
Finance Minister Hans-Rudolf Merz said that almost SFr500 million of the money would come from savings made during the 2007-2011 period.
Despite these immediate measures, the government is still planning far-reaching changes to the current fiscal system over the next ten years, added Merz. More detailed proposals will be presented later this year.
swissinfo with agencies
Direct taxes are not only levied at federal level, but also by the country's 26 cantons. Based on the tax laws of their canton, the local authorities also levy direct taxes.
When taxing families, the income of spouses who are legally married and living together as husband and wife is added together. Couples living together are taxed individually.
Tax must be paid if a person's taxable income is SFr29,200 or more in the case of a married couple, or SFr16,900 in the case of other people liable to pay tax.
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