Switzerland to Fund Military Expansion with a Decade-Long VAT Hike

VAT Increase to Bolster Defense Spending

According to Главком: In a move to strengthen its armed forces, Switzerland plans to raise its Value Added Tax (VAT) by 0.8 percentage points for a ten-year period starting in 2028. This measure is projected to generate approximately 31 billion Swiss francs to enhance the nation's defense capabilities. On January 28, 2026, the Federal Council instructed the Federal Department of Defence, Civil Protection and Sport (DDPS) to prepare a draft consultation document by the end of March. The final proposal will be put to a national referendum in 2027.

Ramping Up Defense Expenditure

As part of this initiative, the Swiss government aims to increase annual defense spending to 1% of its Gross Domestic Product (GDP) by 2032. Switzerland's current standard VAT rate is 8.1%. The tax hike is expected to help cover rising costs for defense equipment, which has become significantly more expensive due to inflation and heightened global demand. Government spokesperson Martin Pfister noted that substantial advance payments are required for major defense procurement projects. This policy shift reflects a broader reassessment of security needs in Europe.

Authorities are also evaluating alternative models to finance military expenditures, including:

• A financial transaction tax
• A wealth tax
• A corporate profit tax
• An increase in payroll deductions

These potential measures underscore the Swiss government's heightened focus on security and defense spending in response to evolving global challenges. The planned VAT increase and other funding options signal a serious governmental commitment to modernizing the military. This could have significant societal and economic implications, as the tax burden and the allocation of national resources are likely to be debated by citizens in the coming years.