On 14 June 2015 Swiss voters will be asked if they want to impose a 20% federal tax on inheritance. Gifts and donations while alive would also be caught by the tax. Currently inheritance tax is a cantonal matter and most Swiss cantons don’t levy any.

The proposal
The new federal tax of 20% would be charged on bequeathed amounts over CHF 2 million and any amount over 20,000 gifted per year – the 2 million would include cumulative gifts. Gifts made from 1 January 2012 onwards would be retrospectively included. Assets transferred to spouses would be exempt. The new regime would replace cantonal inheritance tax and the proceeds would be split between the cantons and the confederation with the federal portion used to plug part of the gap in state pension funding.

Arguments in favour of the proposal
Those behind the initiative view the proposed tax as a practical way to defend state pensions in the face of an aging society. In addition, they assert that the CHF 2 million deductible means that only the wealthiest 2% of the population would pay, thus helping to address inequality. The relevance of this claim however is questionable. While it is true that less than 2%¹ of the total population have net wealth over CHF 2 million, what matters is the percentage that has it when they die – wealth rises significantly with age. An analysis by Credit Suisse found that 48% of those between 45 and 85 years age in Switzerland had over CHF 1 million, suggesting that considerably more than 2% of Swiss residents will die with wealth in excess of CHF 2 million.

Arguments against the proposal
Opponents argue that inheritance tax is a cantonal matter and a federal tax encroaches on the independence of cantons. They also maintain that an inheritance tax on top of a lifetime of wealth tax amounts to double taxation (triple if income tax is included). Some also worry that such a tax would complicate the inter-generational transfer of family businesses and prompt some businesses to quit Switzerland. Then there is a concern that retrospectively applying new rules from 1 January 2012 will undermine trust in Swiss law making.

In addition, the “No” camp say that presenting this new tax as a solution to the pensions challenge is confusing, especially when there is already a plan in place to tackle the issue – the plan called “Pensions 2020” includes pension-funding VAT increases of up to 2%.

The Federal Council and Parliament reject the initiative
The National Council voted against the proposal with 135 votes against, 60 for and 1 abstention, and the States Council cast 34 votes against, 9 for, with 2 abstentions.

Update: this initiative was rejected by Swiss voters on 14 June 2015.

More on this:
Federal Council website (In French)

¹1.87% – from Federal Statistics office 2010