An initiative put forward by the Green Liberal Party of Switzerland, under which the existing Swiss VAT system would be replaced by a new tax upon non-renewable energy has recently been rejected by the Swiss Federal Council.
Under the scheme, it was proposed that the existing VAT rates of 8%, 3.5%, and 2.5% would be replaced by a single rate of tax on energy derived from non-renewable sources (i.e. coal, natural gas, oil), thus allowing the Swiss Government to meet its energy and climate policy objectives.
However, the initiative, whilst praised for its aim, was rejected by the Federal Council, primarily due to the fact that VAT currently represents the highest levels of income from taxation within Switzerland. In addition, the Federal Council stated that any such introduction of an energy tax would need to be at an extremely high rate to compensate for the loss of VAT.
Furthermore, the Federal Council believe that such a change would be an increased burden on businesses, as such an energy tax would represent an irrecoverable cost, whereas in many circumstances VAT will be recoverable.