Switzerland boosts childcare subsidy for highly skilled parents Switzerland boosts childcare subsidy for highly skilled parents

Switzerland boosts childcare subsidy for highly skilled parents
31 May 2018

Switzerland’s Federal Council plans to more than double the maximum annual deduction for child care costs to CHF25,000 (US$25,210) from CHF12,100 (US$12,202) per child in a bid to encourage more highly skilled parents into work.

The move would allow parents to deduct a figure up to this amount from their income for federal tax purposes, although their canton and commune taxes would not be affected. Deductions will not be able to exceed the amount spent on childcare 

According to Le News, the aim is to encourage more parents into work, particularly those who are highly qualified, as some parts of the Swiss economy are struggling to find enough skilled staff. The problem today is that well-qualified parents are often excluded from subsidised childcare because their households earn too much.

But this situation creates a double disincentive to work - high income tax rates are piled on top of costly, unsubsidised childcare as much of the childcare costs cannot be deducted for income tax purposes. The scenario is aggravated by the practice of taxing married couples on their combined income.

In addition to higher federal childcare tax deductions, the Federal Council was also keen to impose similar measures on the cantons. But the idea was dropped as too many considered such a move would amount to federal overreach.

Maximum childcare deductions vary from CHF3,000 (US$3,025) to CHF19,200 (US $19,362) per child depending on the canton. One canton, Uri, has no maximum.

It is hoped the move, which would cut federal tax receipts by an estimated CHF10 million (US$10.1 million), will pay for itself by the extra income tax generated from those entering the workforce. The government anticipates seeing an extra 2,500 parents coming back into employment. Switzerland’s parliament will now look at the proposal.

 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.

 

Switzerland’s Federal Council plans to more than double the maximum annual deduction for child care costs to CHF25,000 (US$25,210) from CHF12,100 (US$12,202) per child in a bid to encourage more highly skilled parents into work.

The move would allow parents to deduct a figure up to this amount from their income for federal tax purposes, although their canton and commune taxes would not be affected. Deductions will not be able to exceed the amount spent on childcare 

According to Le News, the aim is to encourage more parents into work, particularly those who are highly qualified, as some parts of the Swiss economy are struggling to find enough skilled staff. The problem today is that well-qualified parents are often excluded from subsidised childcare because their households earn too much.

But this situation creates a double disincentive to work - high income tax rates are piled on top of costly, unsubsidised childcare as much of the childcare costs cannot be deducted for income tax purposes. The scenario is aggravated by the practice of taxing married couples on their combined income.

In addition to higher federal childcare tax deductions, the Federal Council was also keen to impose similar measures on the cantons. But the idea was dropped as too many considered such a move would amount to federal overreach.

Maximum childcare deductions vary from CHF3,000 (US$3,025) to CHF19,200 (US $19,362) per child depending on the canton. One canton, Uri, has no maximum.

It is hoped the move, which would cut federal tax receipts by an estimated CHF10 million (US$10.1 million), will pay for itself by the extra income tax generated from those entering the workforce. The government anticipates seeing an extra 2,500 parents coming back into employment. Switzerland’s parliament will now look at the proposal.

 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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