Switzerland raises VAT by 0.5 percentage points to boost arms purchases

A half-percentage-point increase in VAT in Switzerland, to be in place for the next 12 years, to fund spending on armaments and security. This was decided by the government, “following the deterioration of the geopolitical situation”, according to a statement from the Federal Council.

“The additional revenue thus generated will be allocated exclusively to priority expenditure on the army’s equipment,” the statement reads. This will enable, Berna continues, the necessary investments to be made to improve the protection of the population and the country against the most likely threats, namely hybrid activities and remote attacks.

A defence procurement fund with borrowing powers will increase flexibility in payments and help to speed up the necessary purchases. At its meeting on 12 August 2026, the Federal Council therefore adopted the dispatch on the ‘temporary’ increase in value added tax.

In recent years, the government’s statement continues, the geopolitical situation and the geopolitical context in which Switzerland finds itself have deteriorated significantly. As a result of the cost-cutting measures adopted over the past few decades, the armed forces have ‘critical shortcomings in terms of capability and equipment’, the statement reads, ‘which limit their ability to protect the country and its population effectively from the consequences of the deteriorating security situation in Europe’.

To defend itself against the most likely threats – namely hybrid activities and remote threats – the army will need 24 billion francs over the coming years to fund additional investment in armaments.