As minds change in Europe and the idea of a VAT differentiated according to environmental criteria circulates in the chambers, Adèle Thorens Goumaz wonders whether Switzerland should follow suit.
In Switzerland, the polluter-pays principle is part of the foundations of environmental law. It is set out in Article 74 of the Constitution and requires that the costs of preventing and repairing harm to the environment be borne by those who cause it.
However, this principle is very poorly applied. Many goods and services that are unfavourable to the environment are today available at a low price, while ecological alternatives cost more. In these conditions, a wrong signal is sent to consumers and the most environmentally friendly options are sometimes unaffordable for low-income households. This situation disadvantages on the market the companies that strive to preserve natural resources, often at the cost of major efforts in terms of innovation and investment, while those that do not assume their environmental responsibilities have an easy life.
Ecological taxation aims to address this problem by internalising environmental costs in the prices of goods and services, in accordance with constitutional requirements. In Switzerland, the CO₂ tax on heating oil or tax deductions for energy renovations of buildings are examples of this. One of the most important federal levies, however, escapes this logic. This is VAT. Differentiated rates do exist, since basic necessities such as foodstuffs or medicines are taxed at a lower rate. But these tax reductions are not linked to any environmental criteria.
In 2009, while the Federal Council proposed a highly controversial revision of VAT, I had requested, by way of a postulate, a report on how it could be modulated according to sustainability criteria. The objective was to promote responsible consumption and a responsible economy, for example by granting more favourable tax treatment to goods and services that have sustainability labels. The Federal Council, like the National Council, had flatly refused to produce such a report. At the time they wanted to simplify VAT and, in their view, my proposal went in the wrong direction.
Currently, a reduced circular VAT proposal of 5.5%, put forward by deputy Stéphane Delautrette, is also being discussed in the National Assembly in France.
But time passes, and attitudes change. In April 2022, the European Union adopted a directive enabling the encouragement of applying reduced rates for goods and services that are environmentally friendly. In the same year, in France, around sixty companies signed an open letter calling for the introduction of a VAT differentiated according to environmental criteria.
Currently, a reduced circular VAT proposal of 5.5%, put forward by deputy Stéphane Delautrette, is also being discussed in the National Assembly in France. The idea is to repair rather than throw away, in order to reduce resource waste. The circular VAT would thus apply to repair activities in the cycles, textiles and household appliance sectors. The objective is to support professionals in the sector and to maintain a sufficient supply across the whole of French territory. The project is being processed and still has to go through the Senate. It shows that the idea of applying the principles of ecological taxation to VAT is gaining ground.
Obviously, the implementation of a green VAT involves risks and will not be simple. Depending on how it is designed, it can generate a reduction in tax revenues, which will have to be compensated. If one decides to increase taxation, and therefore the prices, of environmentally problematic goods and services, one must also ensure that more sustainable and, above all, accessible alternatives exist, otherwise low-income households will be penalised.
The fact of paying for the environmental damage one generates cannot, nor should it be considered a “ permit to pollute ”.
Monitoring must also make it possible to verify that tax reductions are indeed passed on to the price of the goods concerned. The objective is indeed to support the most responsible companies, but also to make their products and services more affordable for consumers.
Finally, it must be borne in mind that ecological taxation, whether applied to VAT or taking other forms, is not always a panacea. The fact of paying for the environmental damage one generates cannot and should not be considered a “permit to pollute”. In the case of particularly polluting products or services, it is not enough to internalise environmental costs. It is better, through well-designed technical prescriptions, to simply remove them from the market, particularly when ecological and affordable alternatives exist.
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