Reform of Marriage & Family Taxation - Part 2: Costs for Third-Party Childcare, the Changes, and the Criticism

Discover the controversial changes to marriage and family taxation regarding childcare costs for third children in our four-part series.

2017

Reform of Marriage & Family Taxation - Part 2: Costs for Third-Party Childcare, the Changes, and the Criticism

In recent years, the taxation of marriage and family has undergone several reforms. Now, discussions are taking place again about two reforms. The first concerns the tax consideration of third-party child care costs, and the latter the abolition of the marriage penalty. However, both are controversial. Findea explains these plans in a series of four articles. First, the respective situation will be presented before introducing the changes and the criticisms. This second article presents the planned changes concerning the tax treatment of third-party child care costs. In addition, the criticism of this project is explained.

Changes

‍To achieve the goal of better reconciling family and career (see Part 1), the Federal Council proposes to increase the deductions for third-party child care costs for direct federal tax to a maximum of CHF 25,000.- per child per year. For cantonal and municipal taxes, the cantonal law should continue to set the amount of deduction, which should be at least CHF 10,000 per child per year. Lower tax revenues of 10 million Swiss francs are expected annually for the direct federal tax, and 25 million Swiss francs for the cantonal and municipal taxes. However, these lower revenues are expected to be compensated by the projected increase in employees.

Criticism

‍Particularly under fire is the increase in deductions at the cantonal and municipal level. Such a minimum requirement by the Federal Council violates the tax sovereignty of the cantons and is not compatible with federalism. This view is shared by the Conference of Cantonal Finance Directors, as well as the SVP, CVP, and FDP political parties. Therefore, the majority's approval of the reform in parliament may be doubted.

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