Abolition is becoming a distant prospect

It almost looked as if the “mission impossible” could succeed this time. A bill to abolish the imputed rental value, which has angered homeowners across the country, was about to pass in parliament. The construct is intended to ensure fiscal justice between tenants and owners, but has been on the hit list of the civil parties and the homeowners association for many years.

To date, all attempts to eliminate imputed rental value have failed in parliament or before the people. Things looked better on the new attempt. Even Jacqueline Badran, the SP’s main spokesman on tax issues, was willing to talk. The proposal was already well advanced; on Thursday it was on the agenda for a very final discussion in the Council of States. His preliminary advisory commission had previously requested that the National Council be submitted to and pave the way to an agreement.

But things turned out differently. The majority of the Council of States preferred to stick to the previous position on the last two major controversial issues. This means that the fate of the proposal is once again completely open after seven years of preparatory work.

On Monday it will be the National Council’s turn again. The fact that he gives in on both questions is unrealistic. A consensus conference must therefore be set up. You will need a lot of imagination and skill to find a proposal that has a majority in both chambers, based on the clear verdict of the Council of States. A crash would no longer be surprising.

In principle, everyone would actually agree that the core of the reform is clear: Anyone who lives in their own home no longer has to pay tax on the rental value, but can also no longer claim deductions for building maintenance. The tax deduction for interest on debts for homeowners would also be severely restricted or eliminated entirely. An exception applies to people who are buying a house or apartment for the first time: They could deduct part of the debt interest for a maximum of ten years.

Valais and Grisons are putting pressure on them

The two big points of contention remain. The first concerns the question of whether the reform should also cover second homes. If an exception applies to them, owners of chalets and other holiday apartments would still have to pay tax on the imputed rental value. Tourism cantons such as Valais or Graubünden are vehemently demanding such a solution because otherwise they would have to reckon with high tax losses.

The National Council has clearly rejected such a regulation, as has the Federal Council. Both argue that such unequal treatment would be difficult to explain legally and would be administratively complicated. It could also open up new optimization opportunities by moving places of residence or mortgage debt.

But the Council of States remained tough on Thursday and once again sided with the mountain cantons: the reform should not apply to second homes. Consequently, he also scuttled the additional proposal that the National Council had drafted to address the concerns of the mountain cantons: They should be able to introduce a new property tax on real estate in order to compensate for their tax losses. In the Council of States’ concept, this is not necessary.

Tricky dispute over debt interest

The second point of contention concerns tax deductions for interest on debts. A general abolition obviously went too far, especially since interest on debts not only accrues on owner-occupied homes, but also on rented properties. This is where the National Council comes in: Anyone who owns rental buildings could continue to deduct part of the debt interest – everyone else cannot. The homeowners association is not satisfied with this, but some citizens hope that this solution will bring the left on board.

But here too, the Council of States stuck to its solution: It wants all taxpayers to be able to deduct interest on debts amounting to 70 percent of all investment income – regardless of whether they have rented properties or not. This is going too far for the SP.

While parliament is creaking in the Bundeshaus, the headwind outside is increasing. A few days ago, the umbrella association of the construction industry wrote a letter to parliamentarians: The companies active in the areas of expansion and building envelopes have unexpectedly spoken out clearly against the proposal. What particularly bothers her is that tax deductions for building maintenance are to be abolished – even when it comes to work that promotes energy efficiency and climate protection. The cantons could stick to it, but the federal government would no longer have it.

The construction industry is not alone in its resistance. Shortly before the session, the tenants’ association also spoke out surprisingly clearly against the reform. He also rejects the National Council’s version, which is less “owner-friendly”. And the majority of the cantonal governments were skeptical or even negative about the reform from the start.

Construction, tenants, cantons: Even if it is unclear how hard the various lobbies would put in, it can be assumed that the bill would have a difficult time in a referendum – if it does not already fail in parliament. We will know more at the end of next week.

Uncertain tax losses

A big issue is the financial consequences. They cannot be predicted precisely because they depend on the level of mortgage interest rates. At an interest rate of 1.5 percent, homeowners as a whole would be able to save 1.7 billion francs per year, most of which would go to cantons and municipalities.

According to Comparis, interest rates for ten-year mortgages currently average just under 1.7 percent. If they fall sharply following the National Bank’s latest decisions, the relief for homeowners would be greater – and thus also the losses for the tax authorities and the resistance of the left.