DossierPublished on 1 November 2024

Reform of the taxation of married couples and families

Married couples are currently taxed jointly, which can lead to a higher or lower tax burden compared to unmarried couples, depending on how the income is distributed between the spouses. Parliament instructed the Federal Council to submit a dispatch with regard to switching to individual taxation. What does this change entail?

Brief summary

At present, married couples are taxed jointly and unmarried persons are taxed individually. In the case of married couples, both incomes are added together to determine the tax burden, whereas for unmarried persons, the individual income is decisive. With the progressive income tax system, this results in unequal treatment of married and unmarried persons. The breakdown of income between the spouses plays a role here: married couples with an unequal distribution of income often have a lower tax burden than unmarried couples in the same economic circumstances. By contrast, where income is divided equally between the spouses, married couples may be subject to a higher tax burden.

The Federal Act on Individual Taxation proposed by the Federal Council involves switching from joint taxation of married couples to individual taxation. This would allow taxation to be independent of marital status, thereby eliminating the current unequal treatment of married and unmarried persons. The switch to individual taxation would improve the employment incentives for secondary earners in married couples, which should have a positive impact on employment, as the additional income earned from the second spouse taking up a new job or getting paid more would be taxed at a lower rate.

As of: November 2024

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Background

In the 2020 autumn session, Parliament decided to include the adoption of a Federal Council dispatch on the introduction of individual taxation in the 2019-2023 legislative programme.

The popular initiative «For individual taxation regardless of marital status (Fair taxation initiative)» was submitted on 8 September 2022.

On 21 February 2024, the Federal Council adopted the dispatch on the popular initiative «For individual taxation regardless of marital status (Fair taxation initiative)» and the indirect counter-proposal (Federal Act on Individual Taxation).

The draft Federal Act on Individual Taxation is an indirect counter-proposal to the popular initiative «For individual taxation regardless of marital status», which the Federal Council recommends rejecting.

Key measures

Based on the parameters defined by the Federal Council, the draft Federal Act on Individual Taxation provides for the following measures:

• In the future, married couples are to be taxed in the same way as unmarried couples and are to fill out two separate tax returns. The allocation of income and assets will be based on the civil law circumstances.
• The direct federal tax deduction for children is to be increased from CHF 6,700 to CHF 12,000 per child, as the transition to individual taxation will reduce the tax relief effect of the deduction for children for married couples.
• The bill does not provide for any special deductions for households with only one adult or for married couples with little or no secondary income.
• However, the bill does provide for tax rate adjustments. For instance, the tax rates are to be reduced for low and middle incomes and raised slightly for very high incomes. These adjustments will accentuate the progression of the tax rates. However, this will be counterbalanced by the reduced progression, particularly for dual-income married couples with a relatively equal distribution of income, that will result from the switch to individual taxation. The aim of the tax rate adjustments is to ensure that the reform has a more even tax relief effect across the various income brackets.
• It is intended to introduce individual taxation at all levels of government.

Financial consequences

Based on the 2024 tax year, the Federal Council estimates that direct federal tax receipts will fall by around CHF 1 billion if individual taxation is introduced with the parameters being discussed by the Federal Council. Of this, 78.8% (around 800 mn) will affect the federal government and 21.2% (around 200 mn) will concern the cantons.

The cantons will also have to transpose individual taxation into cantonal law. The financial impact will depend on how the reform is implemented in cantonal law, and in particular on the design of the tax rates. Due to the cantons' autonomy to set their own rates, the Confederation cannot impose any requirements in this area. Consequently, the Federal Council cannot comment on the financial consequences for the cantons and communes.

Given that the cantons will also have to adapt their tax legislation, the changeover will probably be protracted, which means that the reduction in receipts would not occur for several years.

Popular initiatives on the taxation of couples

The popular initiative from Die Mitte entitled «Yes to fair federal taxes for married couples too – put an end to discrimination against marriage!» was likewise submitted on 27 March 2024.

In a decision dated 16 April 2024, the Federal Chancellery confirmed that the popular initiative was successfully launched, with 101,382 valid signatures.

The initiative is calling for the income of married couples to be added together when calculating direct federal tax, without putting married couples at a disadvantage relative to other taxpayers. If this popular initiative is not implemented in tax law within three years of being accepted, the Federal Council is to use an ordinance to define an alternative tax calculation for married couples in addition to joint taxation, based on the tax rates and deductions for unmarried persons in accordance with the legislation on direct federal tax. The lower of the two tax amounts calculated is to be charged.

Current status

The current status of the work being carried out can be found in French, German and Italian on the website of the Federal Tax Administration (FTA):

Taxation of married couples and families | FTA (admin.ch) / in german