Swiss Council of States approves 24 billion franc military fund with reduced tax hike

Parliamentary approval and fund structure

Switzerland's Council of States approved a 24 billion Swiss franc armament fund on Monday, voting 25 to 17 with three abstentions to finance military procurement through 2045. The legislative model lowers the proposed value-added tax increase from the 0.5 percentage points requested by the Federal Council to 0.2 percentage points, after an initial January concept of 0.8 percentage points found little political backing. To cover the remaining financial requirement across the 18-year period, the funding framework allocates at least 2 billion francs annually from the regular federal budget, alongside half of future budget surpluses and a slower repayment schedule for Covid-19 debt. Alternative financing ideas from center-right lawmakers, including selling state-held Swisscom shares or seeking special payouts from the Swiss National Bank, were discarded during negotiations. Security committee president Mathias Zopfi argued that a smaller tax hike provides a more viable path.

That should be more reasonable.

The battle over debt ceilings and decoupling

The senate's decision doubles the initial borrowing authority of the fund from 6 billion francs, proposed by the Federal Council, to a ceiling of 12 billion francs. Under the adopted structure, this 12-billion-franc loan capacity begins decreasing by 1.2 billion francs each year starting in the eighth year of operation. Furthermore, lawmakers separated the legal enactment of the debt-capable fund from the mandatory constitutional referendum on the value-added tax increase. If the National Council approves the measure in December 2026 without an opposing referendum against the fund legislation, the military could access up to 12 billion francs in credit as early as January 2027.

Political reactions across party lines

The decoupling mechanism drew sharp resistance from the Social Democratic Party (SP), which argued that separating borrowing authority from secured tax revenue risks severe fiscal instability. SP lawmaker Baptiste Hurni called the 12-billion-franc ceiling a blank check for an armed forces administration facing scrutiny over non-fixed price terms for new fighter jets. Lawmaker Franziska Roth criticized the two-year gap between fund creation and the tax vote during the floor debate.

This decoupling from refinancing could lead to a disaster of biblical proportions for our federal budget.

Parties from the center and right, including FDP.The Liberals and the Swiss People's Party (SVP), backed the funding expansion despite skepticism regarding public tax votes. FDP member Josef Dittli noted the electoral headwinds facing any direct tax hike for defense spending.

Let us not kid ourselves: the chances of approval for a value-added tax increase in favor of the army are small, vanishingly small.

Next legislative steps and future timeline

The legislative package moves to the National Council for deliberation during its December 2026 session. Under the timetable adopted by the Council of States, the national referendum on the 0.2 percentage point value-added tax increase will take place in 2028, following national parliamentary elections, rather than in 2027 as initially planned by the executive branch. If voters approve the constitutional amendment at the ballot box, the value-added tax adjustment would take effect in 2029 and expire at the end of 2045.