What is part of the “daily needs” and should therefore be tax-privileged? A National Council commission finds tampons and pads, but not diapers and pads for incontinence. The discussion shows that different VAT rates are not only distorting but also unfair.
The responsible committee of the National Council recommends that the reduced rate be charged for menstrual hygiene products, i.e. primarily tampons and sanitary towels.
It applies to bee honey, but not to the bee colony. For edible fish too, but not for ornamental fish. And those who buy natural cut flowers benefit from it, but not those who want to give away artificial flowers: we are talking about the reduced VAT rate of 2.5 percent. It applies primarily to food and medicines, but also to newspapers and books.
The hotel industry once again has an extra sausage and only has to add 3.7 percent to overnight stays – but alas, a hotel stranger wants to have breakfast, because then the normal rate of 7.7 percent is due again.
These examples show that the exemption rules for VAT lead to numerous problems of delimitation. Distortions and injustices are thus programmed. In the special session of the councils in May, another exception should now be decided: the competent commission of the National Council recommends that the reduced rate be charged for menstrual hygiene products, i.e. primarily tampons and pads. So far, the normal rate for hygiene items applies.
In individual cases, it is always difficult to argue what is part of “everyday needs” and what is not. In the National Council commission, for example, an extension to baby diapers and pads for incontinent people only just failed. This shows that there is a lot of arbitrariness in such decisions.
Actually, VAT is not a bad tax because it is based on consumption, has a large tax base (which allows for low rates) and saves and invests with care. Of course, one should not be naïve: Politicians are only too happy to tweak the rates in order to generate additional revenue, as the minimum tax rate of 15 percent in the EU shows. It is therefore good if the state also has to finance itself through direct taxes, which citizens tend to resist.
The benefits of VAT only come into play when it is simple. The Federal Council had already tried a uniform rate a decade ago, but failed in Parliament. Ultimately, the reduced rates are a relic from the days when food dominated spending. But nowadays the average Swiss household only gives 6 percent of income out for it.
A year ago, the Council of States made a new attempt at a standard rate, which would probably be just under 7 percent. But the responsible commission rejected the initiative on the flimsy justification that there was no political majority for it. That’s where the cat bites its own tail: the parliamentarians have it in their hands to create political majorities if they think something is reasonable.
Nothing remains of the original enthusiasm in the Federal Council either. A few years ago he had rejected the reduced rate for various hygiene items, but now he is suddenly in favor of products for menstrual hygiene.
In the VAT package, which will be negotiated in May, there is no longer any mention of a uniform rate. It’s a case in point where lobby groups benefiting from the deep sentence have stifled discussion. Simplifying the VAT regime could save up to half a billion francs in collection costs.
Tax matters are usually terribly complicated. In the case of VAT, on the other hand, the solution is obvious: a flat rate. This would be what Americans refer to as “low-hanging fruit.” Not picking them is more than annoying: if you create a new special rule here and there, you turn a comparatively efficient tax into one that perpetuates distortions and injustices.