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The Swiss Federal Council disapproves of national inheritance taxes

The Federal Council rejecting a National Tax on inheritances and gifts, as proposed February 15th last year by several political parties among which the EVP, the SP, the Green Party as well as the Swiss Federation of Trade Unions, did not come as a surprise, since the fiscal rights fall within the competence of the cantons.

The proposal comprises a 20% tax levy on inheritances above CHF 2 million. Two-thirds of the money would be allocated to the AHV (Alters- und Hinterlassenenversicherung), the social security and pension fund, leaving only one third for the cantons. The Federal Council stresses the cantons being entitled to levy the inheritance taxes and gift taxes, which, not unimportantly, guarantees them considerable tax revenue, as was made known by the Federal Department of Finance. In 2010 the collected revenues by the different cantons added up to around CHF 974 million.

The current Swiss rights on inheritance and gift taxes are exercised by the cantons only, and according to their own individual guidelines. Tax rates and exemptions thus vary from canton to canton. In each of the cantons the surviving spouse is exempt from inheritance tax. In some cantons other heirs are equally exempt. In the canton Schwyz no tax is levied on either inheritances or gifts, whereas in Lucerne, only inheritances are taxed.

The Federal Council is also critical of the proposed retroactivity of the National Tax, which would effectively mean taxation of all gifts as from January 1st 2012. This would be disproportionate, according to the Federal Council.

The Swiss people will have the final say on whether or not the initiative will pass. The referendum is expected to take place in 2015 or 2016.