Getting married in Switzerland was equivalent to paying more taxes than a single person. And a referendum has put an end to the problem

In Switzerland, marriages they are news. And not because of its rise or fall, demographic issues or new trends when celebrating them. They are for strictly tax reasons. In a historic decision the Swiss have supported majority (with 54% support) a reform that will basically put an end to what is called the “marriage penalty” in the country. In other words, saying ‘I do’ in Switzerland will no longer be (in most cases) a sentence to paying more when declaring income to the Treasury.

The decision has come preceded by an intense debate, which gives a clue that the issue does not only have fiscal implications. The background is social, cultural and historical.

What has happened? That after years of debate Switzerland has given the ‘green light’ to a key tax change for marriages. Couples in the country who formalize their relationship will stop paying taxes jointly, through a single tax return in which the sum of their income and assets is taken into account.

From now on, each spouse will be taxed individually. Just as if he hadn’t gone through the altar. The measure has received the endorsement of 54% of voters during a referendum in which they have discussed more topicsbut it does not mean that it will be activated immediately. The idea is that it be adopted gradually, over the next five years. The cantons have margin until 2032.

Is it so important? Yes. In fact in Switzerland (and other countries who have paid attention to the fiscal change) there is no talk of joint or individual taxation, but of something much more forceful: the end of the “marriage penalty”.

Because? Because according to its promoters, the current Swiss tax regime punishes those marriages in which both spouses work and enjoy good salaries. In these cases, with the current system, couples are forced to bear greater burdens than they would face if they remained single. That is, the same couple can find themselves in one or another tax bracket (more or less beneficial) depending only on whether they have formalized their relationship.

Why’s that? Basically because the Swiss system is a few decades old and is based on a traditional family model in which each household has a single base salary. If the family receives more income (a second payroll) they are usually taxed at a higher marginal rate. “The joint model came from a time when women’s income was considered a ‘complement’ to that of their husbands,” clarify Swiss Info. With the new system, that changes.

Does it influence that much? What we have seen so far may sound abstract or too theoretical, but its scope is better understood with practical examples. In January Swiss Info carried out a simulation for different profiles of households with one or another tax system and found that the ‘photo’ changes quite a bit.

The summary is very simple: new tax model It mainly benefits marriages in which both spouses earn the same or similar amounts and harms (forcing them to face a greater tax burden) those in which there is a greater imbalance of income between the members of the couple.

A practical example. Let’s take the case of a couple in which both members earn the same: 100,000 francs. With the joint model that has been operating in Switzerland for years, its tax burden would be about 6,700 francs. With the new individual taxation system it would drop to 2,700. Things change in couples in which there is only one salary. In these cases (with the same level of income) individual taxation will mean an increase of 32% compared to joint taxation.

What is the change looking for? Its promoters assure that the new model will solve a problem that has been dragging down the Swiss economy for some time: a tax system that discourages paid work for those people who provide a second income to their homes. When changing the legal framework, remember Financial Timesthe Swiss government hopes to increase the nation’s workforce by about 60,000 people and increase the national GDP by about 1%.

Advocates of the change hope it will help women gain strength in the Swiss labor market. It is estimated that only 60% of Swiss women work full time, a percentage lower than the OECD average, which is around 78%. The “marriage penalty” has also led to some curious practicessuch as couples who marry without legally registering their union or even marriages that they divorce before retiring for tax reasons.

Are they all advantages? Not at all. At least that is what the sectors most critical of the measure maintain, warning of several negative effects. The main one, that the new system will result in more bureaucracyincreasing the workload (and costs) of the administration. There are cantons that also fear that the change of model will affect their coffers, punishing them with a loss of income.

Beyond the practical issues there is another ideological one: part of the critical sector warns that individual supervision will generate inequalities that will harm traditional families above all. According to the Government, the new framework will more or less half of the taxpayers see their tax burden reduced. 36% would not notice changes and only the remaining 14% will have to pay more taxes.

Images | Leonardo Miranda (Unsplash), Ronnie Schmutz (Unsplash) and Leo_Visions (Unsplash)

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