Uniform VAT rate eliminates bureaucracy and saves millions

Tax exemptions are like subsidies: they are the result of constant lobbying and usually do not achieve much – apart from bureaucratic effort. This is particularly true of VAT. Nevertheless, attempts to reduce the tax rate again and abolish the special rates have so far failed in parliament.

It is all the more pleasing that the Council of States has now refrained from permanently fixing the special rate for the hotel industry, at least for the time being. Instead, it commissioned its responsible committee to carry out an evaluation.

Parliamentarians would be advised to take a look at the Federal Tax Administration’s industry-specific explanations. The guide for the hospitality industry is 78 pages long.

It states that the standard rate must be paid on food and drinks consumed in the hospitality industry. The situation is completely different for food that is sold for consumption outside the establishment. These must be charged at the reduced rate of 2.6 percent for food – unless they contain alcohol.

The same applies to meals delivered to your home. However, when it comes to food delivery, it must be ensured and documented that the meal is not served, as this would then be a commercial service.

And what about croissants in the bakery or confectionery shop? If you take them away, you’ll be charged a reduced rate. But be careful! It’s not enough for the customer to take the croissant themselves. They must also ensure that they don’t eat it in the restaurant. Whether they use the chairs and tables provided is irrelevant; the important thing is whether “consumption facilities are available.”

A “consumption device” is understood to mean “special facilities for the consumption of food. Examples of such facilities include tables, high tables, counters and other storage areas available for consumption or corresponding devices in trains and coaches.” But be careful! Mere seating without accompanying tables, which primarily serve as a place for customers to rest, are not considered “consumption devices”.

It is a completely different matter if the croissant is eaten as breakfast during an overnight stay. In this case, the special hotel tax rate of 3.8 percent is due.

And so it goes on. The guidelines for the health care system are a full 96 pages long. There, medical treatments are completely exempt from VAT, but not “aesthetic services to improve well-being and performance”.

This means that the dentist does not have to pay VAT on implants, but does have to pay VAT on removable prostheses and braces. And of course she is obliged to document the distinction in detail. It is also a science in itself as to who is entitled to medical treatment without a tax rate and who is not, and how this can be proven in each canton.

It is pure bureaucratic madness. In 2013, the business umbrella organization Economiesuisse estimated the cost of calculating VAT at 1.5 billion francs. A large part of this would be eliminated if a flat rate were charged on everything. The hotel industry’s argument that it would no longer be competitive if VAT of 14 francs 60 had to be paid on an overnight stay costing 180 francs instead of the current 6 francs 85 seems unconvincing.

The federal government’s group of experts on savings has calculated that if the reduced and special rates were abolished, the standard tax rate could be reduced to 6.8 percent and the federal government would collect a billion more. Even better would be a revenue-neutral, even greater reduction. Hardly anyone would end up in social hardship as a result. It is high time to cut the Gordian knot of the civil service thicket and introduce the standard tax rate.