Army Fund: Debts Planned, Revenues Undecided
The Council of States Commission reduces the planned Value Added Tax, yet doubles the credit line. This clarifies the Army Fund politically, but its financial coverage remains unreliable.
Political consensus currently extends only to the expenditure side: Switzerland should strengthen its defence capabilities faster. How the allocated 24 billion francs will be reliably paid remains undecided. The Security Policy Committee of the Council of States has presented a model. However, it relies partly on revenues whose amount nobody can guarantee.
A Smaller VAT – and Several Variable Sources
The Federal Council intended to raise the standard Value Added Tax (VAT) rate by 0.5 percentage points for twelve years starting in 2028. The revenues were to flow entirely into a debt-eligible armament fund. The reduced rate for food and medicines would remain unchanged, while the special rate for accommodation would increase by 0.3 percentage points.
The Council of States Commission rejects this proposal – but not every VAT financing model. It proposes an increase of the standard rate by 0.2 percentage points and the accommodation rate by 0.1 points. Additionally, half of the Confederation's ordinary financial surpluses should flow into the fund. Further contributions are to come from the general federal budget. The duration would extend from twelve to 18 years.
This is a financing plan, but not yet a secured calculation. Surpluses fluctuate with the economic cycle, tax revenues, and political decisions. In 2025, the Confederation closed with a surplus of 300 million francs. However, a temporary additional revenue of 1.5 billion francs from the Canton of Geneva was crucial. Without the relief package and additional revenues, the Confederation expects structural deficits of two to four billion francs from 2027.
The Credit Line Is Doubled
The most striking change concerns not the tax, but the borrowing capacity. The Federal Council wanted to allow treasury loans of up to six billion francs for the fund. The Commission unanimously requests twelve billion. This would allow the Confederation to make larger down payments and secure delivery dates before all revenues have been received.
The mechanism is intended to comply with the debt brake: from the eighth year, the permissible credit line would decrease by 1.2 billion francs annually. It would have to be repaid by the end of the fund. Nevertheless, the model shifts a risk into the future. If surpluses fail to materialise or smaller VAT revenues are insufficient, the ordinary budget must contribute more – or procurements must be adjusted.
Which Alternatives Were Rejected
The Commission examined several models without VAT. Annual savings of at least 1.5 billion francs in the federal budget failed with seven to four votes. Substantial dividends from the Swiss National Bank were rejected with three to two votes and six abstentions. A new wealth tax on particularly large assets also did not find a majority.
These votes illustrate the real dilemma: each financing source distributes the costs differently. A VAT broadly burdens consumption, savings displace other federal tasks, SNB funds are volatile and politically contentious, a wealth tax would affect a narrow group and require new constitutional bases. The Commission found no cost-free solution – it distributed the burden among several pots.
What This Means for Households and Democracy
For consumers, the immediate burden under the Commission's model would be smaller than under the Federal Council's proposal. On a purchase of 1000 francs at the standard rate, an increase of 0.2 percentage points would numerically correspond to about two additional francs, if fully passed on. However, over 18 years, even a small rate change accumulates. And while the reduced rate is exempt from the current proposal, other possible federal saving or tax decisions are not.
Politically, nothing has been decided. The Council of States will debate the matter in the autumn session, which begins on September 14. The National Council will follow. A VAT increase absolutely requires a popular vote; the Commission intends to hold this in 2028. It also wants to decouple any potential referendum on the Fund Act from this vote.
The Open Point Remains Priority
The fund aims to accelerate armament procurements, as long delivery times and high down payments characterise today's market. The Federal Council quantifies the additional need at 24 billion francs: 15 billion for new capabilities and nine billion for price increases. Whether each position of this scope is necessary and time-critical remains a task for individual parliamentary deliberation.
The crucial question of the autumn session is therefore not whether security costs money. It is whether Parliament simultaneously discloses the scope, payment method, and displacement effects to the population. A fund can smooth payment peaks. It cannot make the political price disappear.
