13th AHV pension: government defends VAT rise to 8.5%

The Federal Council holds that the 13th AHV pension should be financed through a VAT increase. On Monday, at a press conference, the government defended the increase of 0.4 percentage points, from 8.1% to 8.5%. The measure goes to the federal vote on 29 November and requires a double majority. The head of the Federal Department of Home Affairs, Elisabeth Baume-Schneider, presented the content and objectives of the federal decree.

The 13th pension will be paid from 1 December. Financing it in 2026 will require CHF 4.2 billion. That amount should rise to about CHF 4.5 billion in 2030 and to CHF 5.4 billion in 2040.

Parliament opted for financing through VAT alone and rejected a parallel increase of 0.2 points in wage contributions. The choice shifts the burden from labour to consumption, because VAT is levied on purchases rather than on earned income.

In the hotel sector the rate will rise from 3.8% to 4%. The reduced rate of 2.6% would remain unchanged.

The Federal Council describes the solution as «anche socialmente equa» (socially fair). It would particularly limit the burden on households with medium to low incomes, which spend a larger share of their expenditure on everyday goods than higher-income households, the executive explains.

The question of the long term

If approved, the increase could take effect at the earliest at the start of 2028. In any case, it will not be sufficient in the long term. In its AHV 2030 reform project, the Federal Council has included a scenario for additional financing of the 13th pension.

Comparing expected revenue with financing needs raises a question. The 0.4-point increase should bring the AHV about CHF 1.5 billion a year, while financing will require CHF 4.2 billion in 2026. The available information does not show how the gap would be covered. Open questions therefore remain about the financial sustainability of the measure.

Criticism has come from both the left and the right.