At its meeting on March 21, 2018, the Federal Council adopted the dispatch on balanced couple and family taxation. In doing so, it is proposing the elimination of the marriage penalty in direct federal tax. The proposal will lead to an annual reduction in direct federal tax revenue of around CHF 1.15 billion.
In its dispatch on the amendment of the Federal Act on Direct Federal Taxation (balanced couple and family taxation), which was adopted on 21 March 2018, the Federal Council is proposing the elimination of the marriage penalty for direct federal tax. This should put an end to decades of controversy and eliminate the additional burden on certain two-earner couples with higher incomes and numerous pensioner couples with medium and higher incomes compared to cohabiting couples in the same economic situation.
The draft of the Federal Act on Direct Federal Taxation (DBG) (balanced couple and family taxation) now provides for a new model according to which the assessing authority calculates the tax burden of married couples in a first step within the framework of joint assessment. In a second step, it determines an alternative tax burden based on the taxation of cohabiting couples. In this model, the couple owes the lower of the two amounts. As a result, the alternative tax calculation is a tariff correction that specifically removes any possible disadvantage to married couples in the tax calculation. This implements the constitutional requirements of the Federal Supreme Court on the taxation of married couples. On the one hand, the model has a very targeted effect on the elimination of the marriage penalty. On the other hand, the introduction of a one-earner deduction ensures that the difference between the tax burdens of one- and two-earner couples does not become too large.
In addition, the basic rate is to be applied to direct federal tax for unmarried couples with children instead of the previously used married rate. However, as this would increase the tax burden for single parents, for social policy reasons the additional burden for single parents should also be compensated with a new social deduction. For cohabiting couples with children, the new solution leads to a higher tax burden depending on income.
The proposed measures will lead to an estimated annual reduction in direct federal tax revenues of around CHF 1.15 billion. Of this amount, 83% (around CHF 950 million) is attributable to the Confederation and 17% (around CHF 200 million) to the cantons. Of the total amount of reduced income, around CHF 700 million is attributable to two-earner couples, around CHF 300 million to retired couples and around CHF 150 million to single-earner couples. Since the alternative tax calculation is only implemented at federal level, there are no financial implications for cantonal and municipal taxes.
Since a consultation on the model of alternative tax calculation has already been carried out in 2012 and no new findings are expected from an additional consultation, the Federal Council has decided not to hold another consultation.
The press release of the Federal Council dated 21 March 2018 is available here.
