In the discussion regarding the medium- and long-term financing of the AHV, various ideas have emerged. The Council of States tasked the Federal Council with preparing a report on how a financial market transaction tax could be structured to achieve this goal.

The government's judgment is clear: From the Federal Council's perspective, financial transaction taxes are not suitable for providing stable financing for the AHV. Compared to other taxes, they perform worse, and their potential for generating additional revenue is limited.

In the report published on Wednesday, it was pointed out that Switzerland already has two financial transaction taxes and generates higher tax revenues from these than comparable European countries.

Switzerland Already Has Emission and Turnover Taxes

Financial transaction taxes can be levied on securities transactions, on credit and deposit transactions in banks' interest rate business, and on foreign exchange transactions. In Switzerland, there are an emission tax and a turnover tax in place, which collectively yield approximately 250 million Swiss francs and 1.3 billion Swiss francs per year, respectively.

Arguments for the Federal Council's rejection include issues related to tax fairness, negative incentive effects, and increased volatility and distortions.

«Because financial markets can be geographically flexible, a financial transaction tax could lead to the provision of financial services being relocated from the Swiss financial market to abroad,» the report states. This would not only result in lower tax revenues but also a loss of value creation.

Competitive Disadvantages

An increase in the emission tax would exacerbate existing disadvantages. Raising the turnover tax rate on domestic securities to the level applied to foreign securities would have negative consequences in terms of efficiency, the report adds. Moreover, the additional revenue generated from these measures is estimated to range between 150 and 200 million francs.

While a tax on new mortgages would generate more substantial and stable additional revenues, it would also increase costs. Taxes on foreign exchange trading would lead to capital flight.

Based on this, the Federal Council concludes that the additional revenue potential from financial transaction taxes in Switzerland is limited and that this form of taxation does not represent a stable source for the medium- to long-term financing of the AHV.