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The Federal Tribunal in Switzerland has invalidated a 2016 vote on a proposed constitutional amendment that would have treated married couples and unmarried cohabiting couples equally for tax purposes. The proposal was defeated, but the Tribunal found that the government had provided materially incorrect information that may have undermined the vote. The Tribunal ordered a revote.The proposed amendment was intended to address the so-called “marriage penalty” under Swiss law. Married couples pay tax on their combined income, while cohabiting couples who are unmarried each pay tax on their own income, which frequently results in a lower tax total tax for the cohabiting couples. The problem has long been recognized, but incompletely dealt with. In 1984, the Federal Tribunal held that the tax on married couples was unconstitutional if it exceeded 10% of the amount the couple would have paid if they paid tax separately. Although many of the Swiss Cantons changed their laws in response, the problem persisted. The constitutional amendment stated that: “Marriage consists of long-term cohabitation under the framework of law between a man and a woman. For tax purposes, marriage is considered an economic union. It should not be penalized in comparison with other living arrangements, particularly as regards tax and social insurance.” However, the initiative proved problematic because of its characterization of marriage as “between a man and a woman,” which opponents argued would preclude the possibility of same-sex marriage. In addition, the government provided statistics before the vote that it said showed only 80,000 of Switzerland’s 1.5 million married couples were adversely affected by the current law, while 370,000 came out ahead.The initiative failed by a vote of 50.8% to 49.2%.Subsequently, however, information came to light that the statistics provided by the government came from 2001 data that had never been updated and included only married couples without children. New data indicated that some 454,000 married couples were adversely affected by the current law. According to the Tribunal’s 10 April decision, “the incompleteness and the lack of transparency of the information provided…violated the freedom of the citizens to vote.” It is not clear when a new vote might be scheduled. Nor is it clear that any new vote will be held. The Swiss Parliament has the power to revise the tax law as it applies to couples without a constitutional amendment.
A revision of the tax regime as applied to couples would save tax costs for employers of married expats living in Switzerland.
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