The micro-tax as a tax of the future

by Guy Mettan,* member of the initiative committee, Geneva

(3 May 2021) On February 25, 2020, the Federal Gazette published the text of the Swiss federal popular initiative entitled “Micro-tax on cashless Monetary Transactions", paving the way for the collection of signatures.

The idea is based on a simple premise: in a world where the economy is becoming increasingly dematerialised and jobs are being replaced by robots and are less and less linked to the physical economy, the principle of taxing work and individuals, inherited from the industrial age, is becoming obsolete.

The scale of electronic transactions has become staggering and unrelated to the needs of the production of goods and services. In 2017, for a world GNP of around $81,000 billion, global debt reached $233,000 billion (3 times the GNP) and derivatives 750,000 billion (almost 10 times the world GNP)! Both the amounts and the number of these transactions, facilitated by high-frequency trading and other technological tools, are highly opaque. As for derivatives operations, it’s even worse! The Swiss National Bank (SNB) has been silent since 2013, when the number of interbank transactions varied from 1.6 to 2 million per day for daily amounts of around 500 billion.

A conservative estimate, however, puts the total tax base of transactions in Switzerland at CHF 100,000 billion (150 times the national GDP).

The immediate effect of the micro-tax would therefore bring transparency to these monetary transactions and tax them at an extremely low rate (between 0.01‰ in the first year, and 0.5‰ at the most thereafter, the rate being able to evolve according to the base of the previous year) and in a simple and inexpensive way since all transactions are already recorded by the banks which deduct their fees from these transactions.

At a rate of 0.25 per mil, this solution would raise enough tax revenue to abolish the value added tax (23 billion in 2018), the direct federal income tax (22.4 billion) and the federal stamp duty (2.1 billion), with any surplus being used for the ecological transition and the fight against global warming, for example.

The micro-tax would apply to all monetary transactions, whatever they may be, from the purchase of a morning coffee to the sale of a house, from salary collection to stock market transactions, for all companies and individuals domiciled in Switzerland. But its very low rate, much lower than the fee paid on credit cards for example, and its ease of collection (no need for a VAT or Income Tax declaration!) make it very competitive, while preserving fairness (small incomes and SMEs are more penalized with a 7.7% VAT than a 0.5‰ micro-tax) and tax neutrality (the micro-tax is aimed at replacing existing taxes, and not adding new ones on the top of them).

Like any innovative idea, it excites anxieties and Avenir Suisse [a Swiss think tank], adept of boasting proposals, has already taken the occasion to oppose it, claiming that it would be impossible to identify the payer (Answer: everyone, including the financial sector). The SNB and the financial community are still on hold, well aware that the current casino capitalist system is not sustainable, and that current developments require an anticipated taxation of the future, before an economic, social or health crisis forces to do so. In a country where tax debates last for years, it is not too early to open the discussion.

* Guy Mettan is a political scientist and journalist. From 1997 to 2020, he was director of “Club Suisse de la Presse” in Geneva. Nowadays he is a freelance journalist and author.

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Swiss Federal Popular Initiative «Micro-tax on cashless Monetary Transactions» The Federal Constitution is amended as follows: Art. 128 (new) Micro-tax on cashless monetary transactions 1 The Confederation levies a micro-tax on all cashless monetary transactions by charging a single tax rate on each debit and credit. The intention is to simplify the tax code and to make finance flows transparent. The maximum rate of the micro-tax is 5 per mil. 2 The micro-tax replaces the Value added tax, the Direct federal tax and the Federal stamp duty. 3 The micro-tax revenue finances the tasks of the Confederation and compensates the cantons for cancelled contributions from the Direct federal tax income. 4 When regulating the micro-tax, the legislator is bound to apply following rules: a. Swiss domestic processors of cashless monetary transactions are legally obliged to collect the micro-tax automatically. They will be remunerated adequately for this service. b. Systematic netting is micro-taxed on full value basis. The tax obligation is fulfilled by self-declaration. c. The micro-tax is levied also on cashless monetary transactions processed abroad for persons with fiscal domicile or fiscal residence in Switzerland. The tax obligation is fulfilled by self-declaration. d. If a foreign state introduces a micro-tax equivalent to the Swiss micro-tax, the double taxation is regulated by double taxation agreements. 5 Intent and purpose of the micro-tax must be respected. Art. 130 repealed Art. 132 heading and alinea 1 Withholding tax: repealed Art. 197, Cypher 12 12. Transitional regulations ad art. 128 (micro-tax on cashless monetary transactions), 1 The legislator edicts the transitional regulations ad art.128 and annulment of art.128 (previous) and art.130 within 4 years after acceptance by the people and cantons. 2 In the first year, the micro-tax rate is 0.05 per mil. The rate is annually adapted in order to compensate the three taxes, first on a reduced scale, then altogether. The three taxes are to be cancelled as soon as possible. 3 After acceptance of article 128 by people and cantons, the Swiss National Bank publishes on a monthly basis the totality of the cashless monetary transactions, inclusive sight deposits, intrabank payments und payments processed by new technologies. Source: Swiss Federal Popular Initiative «Micro-tax on cashless Monetary Transactions»

Information on the collection of signatures: https://www.bk.admin.ch/ch/f/pore/vi/vis506.html

The deadline for the collection of signatures is set for November 5, 2021