In order to pay for national defense, Switzerland plans to increase VAT by 0.8 percentage points for ten years starting in 2028, raising the standard rate from 8.1% to 8.9%. Switzerland which has the lowest VAT rate in Europe is planning to change the rate for VAT signaling the defense situation in Europe.

The Swiss Ministry of Defense has concluded that threats to Switzerland are growing. The threat is being directed from Russia. As per the reports there is a possible attack on Europe via Ukraine as early as 2028. According to the Federal Council, Switzerland is already affected by these developments and is increasingly confronted with hybrid conflict dynamics. The Swiss defense ministry further argues that the threat also results from the weakening of NATO.

In recent decades, Switzerland has benefited from NATO’s security architecture; however, with the changing political climate in Europe, the country is planning to take greater responsibility for its own defense. The Federal Council added that steps are being taken to protect the population and the country, so that Switzerland does not pose a security risk within Europe’s defense architecture in the future.

VAT rates in Switzerland vary by sector. The standard rate is 8.1%, which applies mainly to consumer goods. A special rate of 3.8% applies to the hotel industry, while a reduced rate of 2.6% applies to numerous everyday goods, including food and medicines. Services such as health care, education, and culture are exempt from VAT.