MIL-OSI Translation: The WAK expands the counter-proposal to the Riehen municipal initiative to include higher social deductions and a reduction in the top two income tax rates

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MIL OSI translation. Region: Germany/Germany –

Source: Switzerland – Canton Government of Basel Town in German

The community initiative Riehen “Relief of families” calls for an increase in the social deduction for every child who is underage, disabled or in vocational or school training from CHF 7,900 to CHF 9,300. The government council proposes a partial implementation of the demand. The child deduction should only be increased to CHF 8,600. Due to the other proposed measures, the overall tax relief for families will be higher than if the initiative were only implemented.

counter-proposal of the governing council

Based on various political initiatives, in addition to reducing the social deduction for children, the government council is requesting relief measures for child care deductions, insurance deductions, support deductions and a reduction in the lowest income tax rate by 0.75 percentage points to 21.00 percent.

Without there being any political initiative, the government council is also applying for a reduction in wealth tax based on location considerations.

The government council’s counter-proposal results in around CHF 68 million less revenue for the canton compared to the existing financial plan from 2024.

Assessment of the WAK

The Commission has positively received the thrust of the government council’s counter-proposal to the community initiative. The fact that the other political demands from the Grand Council are being implemented with the proposal enables an overall view of the planned relief and the financial effects. However, the measure proposed by the government council to also lower the wealth tax rates was controversial. While some of the Commission argued for location arguments and the intercantonal comparison of the wealth tax burden in favor of a reduction in wealth tax, and while this section of the Commission also sought a reduction in wealth tax that went beyond the proposal made by the government council, arguments from the perspective of another section of the Commission speak for themselves the unequal distribution of wealth in Basel-Stadt against a reduction. This part of the Commission therefore wanted to make the wealth tax reduction less severe and reduce the tax shortfalls by half compared to the advice. In the end, however, the Commission came to the conclusion, in the sense of a compromise, to follow the Government Council’s proposal on this point.

Extension of the tax relief package by the WAK

With 11 to 2 votes, the WAK decided to expand the relief package. On the one hand, the middle and upper income tax rates – analogous to the lower income tax rate – are to be increased by 0.75 percentage points to 27.25% and 28.25% can be reduced. High-income people benefit from this. This measure is intended to reduce the tightening of the progression in the tax rate and send a signal to taxpayers with high incomes. For the canton, this measure means a reduction in revenue of CHF 8 million.

On the other hand, the Commission is requesting that the social deduction be increased by CHF 400 per person. All taxpayers benefit from this, especially those with lower incomes. This sends a signal to taxpayers with rather low incomes. This measure is associated with an estimated loss of revenue for the canton of around CHF 12 million.

The Commission believes that the expanded counter-proposal adequately covers all population groups. Relief for high incomes and assets is also planned, as is relief for lower incomes. This makes it possible to place the focus of the tax relief package both on the lower middle class and on the attractiveness of the location for highly qualified specialists.

The extension of the counter-proposal leads to higher revenue shortfalls for the canton. Overall, based on the current financial plan, an estimated total of CHF 88 million in revenue can be expected from 2024. The Commission believes that the scope of the relief package is consistent with the canton’s good financial situation.

If the proposal can come into force on January 1, 2023, the canton will experience the reduced revenue from 2024. This is because taxes in the canton of Basel-Stadt are not due until the following year. Whether the bill can come into force as early as 2023 depends on when the municipal initiative is withdrawn and whether the referendum is held.

EDITOR’S NOTE: This article is a translation. Apologies should the grammar and/or sentence structure not be perfect.

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