The own rental value is a popular hostile image in the politics of Switzerland. Owners of a self-real estate have to pay a high income tax, of which they never see a cap in cash (natural income). For more than twenty years, the question of abolishing their own rental value has been part of the inventory on the political scene, but a majority proposal has not yet been found. This had two reasons. On the one hand, the own rental value is much less bad than its reputation; In combination with the deduction for maintenance of real estate and interest on debts, this in principle ensures equal treatment of homeowners and tenants and for self-financed and debt-financed owners. In addition, previous proposals for elimination were not consistent: according to the motto "the fives and half Weggli", their own rental value should disappear, but some deductions were still planned.
2017 was new. The association of owners said for the first time that he should also have a reform with the elimination of all related deductions. Low interest rates made it possible: with the current interest rate, homeowners would bring about a system change, even better with the elimination of all deductions.
The Economic Committees (WAK) of the Council of States and the National Council agreed in 2017 to a parliamentary initiative, which provides for a "budget neutral" system change for owner-occupied dwellings in the longer term. Now the WAK of the Council of States has agreed on important points of the reform, according to the announcement of Tuesday, each with clear majorities. Accordingly, in addition to the intrinsic rental value, the tax deduction for property maintenance must also apply to properties occupied by the owner. At the federal level, the abolition of the deduction for energy saving and environmental investments is also planned; the cantons should allow such deductions.
Debt relief deduction survived
But the latest proposal also does not provide for flawless system change at the federal level. It would be great if there were no more mortgage deductions for independent properties. The WAK does not want to go that far. Under the current legislation, the deduction of interest on federal debt can not exceed CHF 50,000 on the total of taxable income. In variant 1, the WAK proposes to limit the maximum debt deduction to 100 percent of the taxable income (for which the own rental value would no longer belong in the future). In variant 2, the maximum deduction would be 80 percent of the income from capital. In the first variant, according to federal estimates, about half of the previous debt deductions would be counted; in the second variant this would still be about two-fifths.
WAK also wants an additional debt deduction for starters of own homes. According to WAK chairman Pirmin Bischof (Solothurn, cvp.) We want to rely on an earlier proposal from the Federal Council. That proposal provided for the increase of the maximum debt deduction for first buyers with initially 10 000 francs. This increase would gradually fall back over ten years. According to Bishop, this special deduction should make it easier for young families to acquire their own home ownership and to comply with the constitutional mandate to promote home ownership.
In the case of a "pure" system change, the promotion of home ownership would be lost. This was due to the fact that the taxed own rental values were well below the market rents. According to a rough federal estimate, this tax deduction makes approximately 800 million francs a year at federal level on the basis of data from 2010. The constitution does not require tax incentives for homeownership; The constitutional mandate would have been adequately replicated with the remaining support measures (relieving the capital collection in the second and third pillars).
Now or never
According to managerial information, it is realistic that a change of system according to the proposed cornerstones could be budget neutral for the federal government in the long term. Much depends, however, on the assumption of long-term interest rates. According to a previous management paper, with mortgage interest rates of around 2.6 percent (from 2010), a "pure" system change could be about budget neutral. The proposed modification of the system would, according to reports, only be budget neutral for the federal government at a level of 3 to 4 percent. In 2017, the average rate on Swiss residential mortgages was only about 1.5 percent. As the reduction of debt relief at this level is not so important, a change of system is likely to relieve homeowners and tax tax authorities. The association of homeowners showed Tuesday because she was satisfied with the decisions of the Council of States. The tenants' association expressed itself more critically, but with a final verdict, the latter still resisted.
The concrete version for the revision of the law should be ready for consultation in the first quarter of 2019. The chance of a change of system is better than in the past, given the low level of interest rates. But the thing did not go. The intrinsic rental value was politically difficult to kill; but once abolished, it will almost never be revived. On the other hand, this does not necessarily apply to the corresponding tax deduction.