Juso Estate Tax Initiative

On December 13, 2024, the Federal Council adopted the statement on the popular initiative submitted by the JUSO “For a social climate policy – fairly financed through taxation (Initiative for a future)”. The initiative calls for the introduction of an estate and gift tax at the federal level. The tax rate would be 50% and levied for estates exceeding a one-time de-minimis threshold of CHF 50 million. The tax is designed as an estate tax and does not provide for any exceptions. The tax revenue is to be used for the “socially just fight against the climate crisis” and the “necessary transformation of the economy as a whole”.

A transitional provision stipulates that the Federal Council should implement the initiative by means of an ordinance within three years of its acceptance. The ordinance is to be applied retroactively to the day the initiative was accepted.

Validity of the Initiative

In its statement, the Federal Council first concludes that there is no reason to declare the initiative invalid. In light of previous practice, there is no violation of the principle of unity of matter, since the introduction of special-purpose taxes by means of a popular initiative has always been approved by Parliament.

The Federal Council does note, though, that it views the retroactive taxation of inheritances and gifts, as called for by the initiative, as questionable from a national policy perspective. However, the retroactive effect is explicitly desired by the initiative and would have to be observed as new constitutional law if it were to be accepted. The initiative also has a certain anticipatory effect due to the associated uncertainty, since potentially affected persons leave Switzerland before the vote or are prevented from moving here. Under current law, however, this is not sufficient to declare the initiative (partially) invalid.

Measures Against Tax Avoidance

The initiative calls for the enactment of provisions for the prevention of tax avoidance, in particular with regard to emigration from Switzerland. These must be enacted by the Federal Council within three years of the initiative’s acceptance.

The text of the initiative merely sets out the objective in this regard. The means by which this objective is to be achieved is thus left to the federal legislator and the federal government. They must adhere to the existing constitutional requirements (especially the principle of proportionality) when designing specific measures against tax avoidance.

The statement clarifies that a person’s emigration abroad cannot be readily classified as tax avoidance and sanctioned with tax consequences. Rather, in addition to the emigration, there must also be an action aimed at tax avoidance. The statement mentions a timely gift as an example in this regard.

The Federal Council also rejects an exit tax for the same reason. Besides, this would be disproportionate infringement of the freedom of establishment.

One possible measure against tax avoidance could be a post-emigration taxation right. This would mean that for a certain period after leaving Switzerland, the individual would be deemed to still be resident in Switzerland. However, the Federal Council makes it clear that this must be limited in time. It is suggesting a period of five years. In addition, the Federal Council points out that in such a case, Switzerland’s right of taxation may be restricted by double taxation agreements and that Switzerland has not concluded any agreement with any state that would allow it to enforce the tax claim abroad.

No Retroactive Effect of Measures Against Tax Avoidance

The initiative states that the ordinance to be issued by the Federal Council will apply retroactively to inheritances and gifts made after the initiative’s acceptance. However, this retroactivity only applies to the collection of estate and gift taxes for persons who have their residence in Switzerland at the time of death or the gift. The statement also clarifies that the measures required by the initiative to prevent tax avoidance cannot be retroactively enforced. These will only apply once the corresponding implementing provisions are in force, which the Federal Council must issue no later than three years after a possible acceptance of the initiative.

No Need for a Pre-emptive Emigration Before the Voting Day

It is highly commendable that the Federal Council clarifies in its statement that any measures against tax avoidance will not be implemented retroactively to the date of the vote. Should the initiative be accepted, taxpayers concerned can still leave Switzerland after the voting day without adverse tax consequences.

Further Political Process

The initiative will be discussed by the Economic Affairs and Taxation Committee (WAK) of the National Council on January 20, 2025, by the National Council as the first chamber in March and by the Council of States as the second chamber in the summer session. Parliament can therefore make its voting recommendation in June. The earliest possible voting date would therefore be November 30, 2025. If this timing is not feasible, the initiative would probably be put to the vote on March 8, 2026.

Only Modest Revenue Would Be Expected From the Estate and Gift Tax at Stake

In the statement, the Federal Council concludes, citing economic studies and an expert opinion it has obtained, that the revenue from the estate and gift tax demanded by the initiative is likely to be modest. Considering the tax losses in income and wealth taxes resulting from the potential emigration of the persons affected by the initiative, acceptance of the initiative would even lead to a significant net loss of revenue for the Federal government and the cantons.