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Taxes to interest rates: How Switzerland wants to boost people's spending power

Helena Bachmann
Helena Bachmann - [email protected]
Taxes to interest rates: How Switzerland wants to boost people's spending power
Consumer groups want Swiss households to have more money. Photo: SNB media

Prices of many products and services have been increasing in the past year, with other hikes still on the horizon. But there are some concrete measures to help Swiss consumers get more bang for their francs.

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While the prices of some goods are declining — for instance, Swiss supermarket chains are lowering the price of hundreds of products — on the whole, other costs are soaring, squeezing disposable incomes of many households

This is not an entirely new phenomenon: prices started to seriously go up in 2022, as inflation rates have risen, and the war in Ukraine caused prices of food and energy to climb as well.

In view of this upward trend, Stefan Meierhans, whom the government has appointed to monitor prices and propose solutions to lower them, met last week with representatives of several consumer groups.

The goal of the meeting was to come up with concrete ways to lower some of the skyrocketing costs, so that Swiss consumers have more money left over at the end of each month.

These are the main points that were discussed and solutions to cut them.

Health insurance

Not surprisingly, given the ongoing discussions about the various ways to curb the constantly climbing premiums — expected to rise by 8 to 9 percent in 2024 — the group considers health insurance to be their top priority.

While the French-speaking Consumer Federation (FRC) reiterated its call to freeze premiums at their existing level until legislators figure out how to reform the current expensive system, others proposed more moderate measures to save money.

For instance, the Ticino association is urging better control of medical bills issued by hospital and doctors to prevent overbilling.

Additionally, a more concerted effort should be made to encourage doctors, hospitals, and pharmacies to promote generic drugs, which cost less than brand medications.

Both are among major causes of growing healthcare costs in Switzerland.

These are other measures pushed by various groups to cut the cost of health insurance:

Would people in Switzerland benefit from a government healthcare scheme?

Should the cost of Switzerland's health insurance be based on income?

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Value Added Tax

If you purchase anything in Switzerland, you have to pay value added tax (VAT), which usually amounts to 7.7 percent of the product price.

This money has been used to finance the old-age insurance scheme, but as these pension funds are drying up, a higher VAT —of 8.1 percent — will go into effect from 2024.

For food and medications, which are now subject to a 2.5-percent tax, the VAT rate will go up to 2.6 percent.

According to Meierhans, these hikes could give some merchants a reason to mark up their prices by a higher margin than permitted.

“We are going to set up price monitoring system to prevent some people from taking advantage of this change to increase their prices more sharply than allowed,” he said.

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Interest-bearing savings accounts

After years of negative interest rates, Swiss National Bank (SNB) raised its rates to 1.75 percent in June.

Most banks, however, have not responded accordingly to this change, Sara Stalder, director of the German-speaking consumer association, pointed out at the meeting.

"When the SNB introduced negative interest rates, the banks had very imaginatively introduced or increased all kinds of fees,” she said. “Now that interest rates have gone up, banks have not completely reversed this course.”

Her group is therefore calling for higher returns on savings accounts. Instead of an interest rate of 0.5 to 0.8 percent — as is currently the case in most banks — financial institutions should offer a 1-percent interest, she said.
 

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