Swiss government to remove ‘marriage tax penalty’ Swiss government to remove ‘marriage tax penalty’

Swiss government to remove ‘marriage tax penalty’
05 Apr 2018

The Swiss government is set to remove the ‘marriage tax penalty’, whereby married couples file a single combined tax return, in a bid to encourage more women into the workplace.

Because tax rates rise in line with income, the second incomes of married couples are taxed at a higher rate than those of single cohabitating ones. Campaigners argue the practice is unfair and acts as a disincentive for second income earners to work. In 1984, Switzerland’s Federal Court ruled that this unequal treatment was unconstitutional when the disparity reached a certain level.

But according to Le Newsthe Federal Council, Switzerland’s executive, has now agreed the details of a plan to remove the ‘marriage tax penalty’. The plan will be presented to parliament imminently.

The tax change is expected to cut government tax revenue by CHF1.15 billion (US$1.2 billion) per year, but will only affect federal taxes. Federal taxes will be calculated twice, once as married couples together and again as two separate individuals. The lower of the two figures will be applied.

Around 80,000 married couples are likely to see a drop in their tax bill, and the Federal Council estimates that 15,000 new second income earners, mostly women, could take up employment as a result.

But the new policy will see unmarried parents lose out. Under the current system, parents enjoy preferential tax rates based on the number of children they have, which helps to offset the marriage tax penalty. Under the new plan, unmarried parents will no longer qualify, although single parents will be compensated with a new tax deduction.

Moreover, another biased policy against working women, whether married or unmarried, still remains. Switzerland’s parental leave is only provided to mothers, thereby creating an economic incentive for couples to choose a father’s career over a mother’s.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

The Swiss government is set to remove the ‘marriage tax penalty’, whereby married couples file a single combined tax return, in a bid to encourage more women into the workplace.

Because tax rates rise in line with income, the second incomes of married couples are taxed at a higher rate than those of single cohabitating ones. Campaigners argue the practice is unfair and acts as a disincentive for second income earners to work. In 1984, Switzerland’s Federal Court ruled that this unequal treatment was unconstitutional when the disparity reached a certain level.

But according to Le Newsthe Federal Council, Switzerland’s executive, has now agreed the details of a plan to remove the ‘marriage tax penalty’. The plan will be presented to parliament imminently.

The tax change is expected to cut government tax revenue by CHF1.15 billion (US$1.2 billion) per year, but will only affect federal taxes. Federal taxes will be calculated twice, once as married couples together and again as two separate individuals. The lower of the two figures will be applied.

Around 80,000 married couples are likely to see a drop in their tax bill, and the Federal Council estimates that 15,000 new second income earners, mostly women, could take up employment as a result.

But the new policy will see unmarried parents lose out. Under the current system, parents enjoy preferential tax rates based on the number of children they have, which helps to offset the marriage tax penalty. Under the new plan, unmarried parents will no longer qualify, although single parents will be compensated with a new tax deduction.

Moreover, another biased policy against working women, whether married or unmarried, still remains. Switzerland’s parental leave is only provided to mothers, thereby creating an economic incentive for couples to choose a father’s career over a mother’s.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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