Voters hit government with triple whammy

Pensioners faced cuts, while the disabled and families stood to benefit Keystone

Voters on Sunday rejected by a clear majority a rise in Value Added Tax, a package of tax breaks and pension reforms.

This content was published on May 16, 2004 - 16:24

The outcome is a heavy blow for the government and parliament, which put forward all three proposals.

The increase in VAT was rejected by 68.6 per cent of voters, the tax breaks by 65.9 per cent and pension reforms by 67.9 per cent. Turnout was 50.1 per cent.

It is the second time in six months that Switzerland's political establishment has been dealt a triple whammy at the ballot box. None of the votes in February on transport, rent and justice issues went the government's way.

Sunday's nationwide votes were seen as a key political battle between Switzerland’s centre-right parties and the Centre-left.

During their campaigns both sides described the polls as a vote of confidence in the centre-right in parliament and the cabinet.

The two main parties in the centre of the political spectrum - the Radicals and the Christian Democrats - were weakened in last October's parliamentary election after the rightwing Swiss People’s Party and the centre-left Social Democrats both improved their share of the vote.

Tax breaks

The Social Democrats and many of the country’s 26 cantons strongly opposed plans for cuts of SFr2 billion ($1.5 billion) a year in federal taxes for families, property owners and shareholders.

They said the rich would benefit the most from the cuts and argued that a drop in federal revenue would force cash-strapped cantons to cut public spending, notably in education and health.

Supporters of the proposals said the tax breaks would spur economic growth and do away with unfair fiscal advantages for unmarried couples.

Parliament approved the tax package, but the centre-left collected enough signatures to force a nationwide vote.

For the first time in Swiss history, cantons also decided to formally challenge parliament’s plans.

Pension benefits

As part of the reforms of the state old-age pension scheme, it was proposed that women should take retirement at 65 (currently 64) - in line with men’s retirement age.

The legal amendment also included gradually cutting pension benefits for widows and slowing down inflation-related increases in pensions.

Centre-left groups and the trade unions collected signatures in record time to force a nationwide vote on the issue.

They argued the reforms were aimed at weakening the main tenet of the country’s social security system.

The government, centre-right and rightwing parties as well as the business community said the reforms were necessary to shore up the pension scheme and save some SFr925 million annually.

VAT hike

The third issue at stake was a 1.8 per cent increase in VAT to finance the old-age pension scheme and shore up the heavily indebted invalidity benefit fund.

VAT in Switzerland currently is 7.6 per cent – below European Union levels.

The issue was a divisive one not only for the Centre-right and business community but also for centre-left groups and trade unions.

swissinfo with agencies

In brief

Three issues were turned down by voters this weekend:

A package of federal tax cuts amounting to SFr2 billion for families, property owners and shareholders.

A proposal to cut state old-age pension scheme benefits to the tune of SFr925 million per year.

A 1.8 % increase in Value Added Tax by to shore up state benefit schemes for the disabled and for old-age pensioners.

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Key facts

Tax breaks: rejected by 67.4 per cent.
Pension reforms: rejected by 67.9 per cent.
VAT: rejected by 68.2 per cent.
Turnout was 51 per cent.

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