Now it should work: Parliament has pulled together to abolish the imputed rental value. The template is convincing. But it only has a chance if the citizens and businesses close ranks.
Today, anyone who lives in their own house has to pay tax on the rental value, but also benefits from many deductions.
Annick Ramp / NZZ
Let someone else say that politics is boring. Hitchcock would have enjoyed the way the ladies and gentlemen in the Federal Palace celebrated, delayed, jeopardized and then pushed forward the abolition of imputed rental value. For a long time it was only clear that everything was being prepared for a proper burial – but no one knew who would be buried: the imputed rental value or the reform to abolish it?
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The matter was clarified on Wednesday, and the Council of States gave in at the last second. He approved the proposal of the unification conference and thus bowed to the National Council. The decision was relatively close. Nevertheless, nothing should go wrong now. It would be strange if the Council of States shot down the proposal in the final vote on Friday. So much dubious fickleness does not fit with the self-image of the chambre de réflexion.
That’s good news. The abolition of the imputed rental value, on which current taxation of residential property is based, is overdue. A fundamental reform is necessary, although the existing system is not as absurd as its critics like to make it out to be. In fact, economists and tax experts are able to explain the logic of imputed rental value in great detail.
Who is supposed to understand that?
But that doesn’t change the fact that obviously relevant parts of the population do not consider the construct to be understandable and – what is more serious – not fair either. Many homeowners cannot or do not want to understand why they have to pay tax on income that they do not earn in francs and centimes.
There is a particular lack of understanding among those who are actually being punished for paying off their mortgages. You still have to pay tax on the full rental value, but you can no longer make deductions for interest on the debt. It is not surprising that understanding of this “logic” is limited. However, the quality of a tax system also depends on its acceptance.
Added to this are the obvious disincentives. The current system with the deduction of interest on debts contributes significantly to the fact that the debt of private households in Switzerland is high compared to other countries and has continued to increase in recent years. We have known for a long time that this is a problem. It was almost ten years ago when the Federal Council formed a commission of experts to make suggestions on the stability of the financial market. And what did she recommend? The imputed rental value should disappear along with debt interest deductions.
For the first time, a balanced template
Parliament has tried many times, but never with such a balanced bill as today. The commoners have repeatedly succumbed to the temptation to ask for the fiver and not give up the Weggli: They wanted to eliminate the imputed rental value, but not forego the tax deductions associated with owning their own home.
Now such games are over. The deductions for building maintenance no longer apply, and you can no longer deduct interest on debts related to your home. This solution is not only consistent, it can also be explained. It makes the tax system simpler, more efficient and clearer. That happens rarely enough.
Nevertheless, the reform will have a difficult time in the inevitable referendum. The fact that the tenants’ association and the left are against it would still be bearable. But they won’t be alone. On the one hand, there are the tourism cantons, especially Valais and Graubünden, which fear for their tax revenue because the change in system also includes holiday homes. However, you could introduce a new property tax on real estate to keep yourself harmless.
On the other hand, the economy is divided. Well-known associations in the construction industry are now clearly speaking out against the proposal, and at best the banks will also dare to voice their concerns. Here as there, it’s about particular interests: the current arrangement with tax deductions is comfortable for both construction companies and banks. If a master painter can tell his customer that the tax authorities will cover 10 to 15 percent of the costs, that is a strong sales argument.
The cantonal parliaments should comment
Dramatic warnings are already circulating: illegal work will increase massively if the tax deduction for building maintenance is abolished, and people will let their properties run into disrepair. Both allegations are unfounded, but they make it clear that the beneficiaries of the current system will fight with all their might to save it.
The civil parties and business associations are in demand. If they manage to close ranks, reform will have a viable chance at the ballot box. It is up to you to ensure that the governments in the cantonal parliaments exercise restraint. It would make no sense for the cantons to torpedo a sensible reform for purely financial policy reasons. The same applies to the construction industry. If everyone only fights for their individual interests, the reform will fail. And the imputed rental value would be concrete for many more years.
