Switzerland’s Federal Council has adopted a dispatch proposing a temporary VAT increase to raise additional funding for army armament expenditure amid a deteriorating security environment.
Switzerland’s Federal Council has adopted a dispatch proposing a temporary increase in Value Added Tax (VAT) to strengthen the country’s security and defence capabilities.
At its meeting on 12 August 2026, the Federal Council proposed increasing the standard VAT rate by 0.5 percentage points for 12 years from 2028. The special rate would rise by 0.3 percentage points, while the reduced VAT rate, which applies, for example, to food and medicines, would remain unchanged.
The additional revenue would be used exclusively for the army’s priority armament expenditure. The Federal Council said the measure is intended to finance investments needed to protect the population and the country against the most likely threats, including hybrid activities and attacks from a distance.
CHF 24 billion armament requirement
The army is expected to require an additional CHF 24 billion in armament investment over the coming years to address capability and equipment gaps.
Of this amount, CHF 15 billion would be allocated to the rapid development of capabilities against the most likely threats. This would primarily cover systems for defence against attacks from a distance, cyberattacks and (mini-)drones, as well as systems to protect critical infrastructure.
The CHF 15 billion includes CHF 9 billion for priority armament procurements considered necessary and an estimated additional requirement of CHF 6 billion for a second ground-based air defence system and the additional costs of the Patriot system.
A further CHF 9 billion would be required to offset substantial price increases in the armament sector caused by increased global demand. The Federal Council said that without adjustment to the new price reality, even armament procurements already planned could not be implemented to the necessary extent.
The Federal Council adopted the orientation of the army towards defence capability on 19 June 2026. It said the prioritised armament procurements planned under that approach could only be implemented if the army receives the additional funding proposed.
VAT rates
The proposed VAT increase would apply for 12 years. The standard rate would increase by 0.5 percentage points and the special rate by 0.3 percentage points.
The reduced VAT rate would not be increased, which would place a lower burden in particular on low-income households.
The Federal Council considers the measure a security contribution required to address the current threat situation. The increase would be limited to 12 years and could not be extended without a further popular vote.
Debt-capable armament fund
The proposal also provides for the creation of an armament fund to manage the additional revenue. The fund would receive all additional revenue from the temporary VAT increase, together with part of the regular army budget.
During the fund’s term, all armament procurements could be financed from it, while Parliament would decide how the fund’s resources are used.
The fund would be debt-capable, allowing necessary advance payments to be made quickly, payment peaks to be absorbed and procurement to be accelerated. Debt would be capped at CHF 6 billion and would have to be reduced again by the end of the temporary VAT increase.
The Federal Council said this arrangement would ensure that the debt brake is fully complied with.
The measure is being proposed against the backdrop of a significant deterioration in Switzerland’s geopolitical situation and security environment in recent years. The Federal Council said savings made over previous decades had contributed to critical capability and equipment gaps in the army, limiting its ability to protect the country and its population from the consequences of the deteriorating security situation in Europe.
