The Swiss Federal Council is preparing a significant fiscal maneuver to address perceived deficiencies in national defense capabilities. Initial proposals suggest a targeted, temporary increase in the Value Added Tax (VAT) by 0.8 percentage points, slated to commence in 2028 and run for a decade.
This proposed tax adjustment is explicitly linked to financing a substantial acceleration of military modernization efforts. The government estimates that realizing the necessary operational readiness requires approximately CHF 31 billion (around $40 billion) in additional capital, underscoring the scale of the required investment.
The rationale underpinning this move is the perceived deterioration of the European security landscape. Official statements emphasize that years of constrained defense budgets have left the Swiss Armed Forces inadequately equipped to counter the most probable contemporary threats, necessitating an extraordinary financial injection beyond standard budgetary allocations.
In preparation, the Federal Department of Defence, Civil Protection and Sport (DDPS) has been mandated to produce a consultation document by the end of March, following a directive issued on January 28, 2026. The final decision is expected to be put to a national referendum in 2027, reflecting Switzerland's commitment to direct democratic oversight on major fiscal shifts.
While the government maintains its long-term goal of reaching 1% of GDP in annual defense expenditures by 2032, officials concede that this benchmark alone will be insufficient to deliver the necessary 'leap' in rearmament required for robust deterrence.
This development places Switzerland—a nation historically synonymous with neutrality—firmly within the growing cohort of European states actively re-evaluating and substantially increasing defense outlays in response to geopolitical pressures. The mechanism chosen, a broad-based VAT increase, signals a commitment to broad public financing for heightened security mandates.
(Source attribution: Based on reporting initially covered by Bloomberg.)