The Federal Council of Switzerland has just announced in a press release the forthcoming policy changes that will officially include electric vehicles to automobile duty starting next year after exempting them since 1997.
Status quo
Switzerland previously exempted electric vehicles from the 4% automobile import tax as the government sought to offer market-based incentives to promote the shift to electric mobility in 1997.
Thanks to this automobile tax ordinance, EV imports surged from just approximately 8,000 in 2018 to more than 45,000 in 2022. The Federal Council further revealed that EV imports reached about 30,400 units in H1 2023, The Swiss Times reported. It represented an increase of about 66% YoY, with a share of around 23% in the first half of the year.
Despite these significant advancements, the tax exemption for electric cars still poses disadvantages for the country.
“This increase led to an appreciable decrease in receipts from automobile duty: for 2022 as a whole, the tax shortfall is around CHF 78 million, and for the current year, a shortfall of some CHF 100 million to CHF 150 million is expected.
If the exemption from duty had continued, the estimated cumulative tax shortfall for 2024 to 2030 would have been CHF 2 billion to CHF 3 billion. By making e-vehicles subject to automobile duty, the Federal Council is acting to redress this shortfall.”
The Federal Council
Policy changes
Considering the substantial loss in income from the automobile tax last year and the forecasted loss in the following years, it would really be crucial for Switzerland to halt the EV tax exemption next year.
The government believes that the tax exemption would “no longer necessary” as the EV uptake has rapidly surged in the previous years.
“The Federal Council takes the view that the exemption from duty as an incentive is no longer necessary, given the sharp rise in the share of e-vehicles in total car imports and the convergence of prices.”
The Federal Council
All parties, excluding the SVP, voted in favor of the Automobile Tax Ordinance amendment during the consultation. Meanwhile, several political parties, including the SP, Greens, and Green Liberals, have expressed hesitancy.
For instance, the SP is against the idea of utilizing the EV tax proceeds for the national roads as it proposes to use it for the agglomeration program. On the other hand, the SVP proposed to withdraw automobile taxes for all vehicles, regardless of powertrain.
Justification
The state government justifies the policy changes in three points. First, it is crucial for the country to make up for the tax losses from the EV tax exemption, as the adoption of the new transportation technology has already surged substantially.
Secondly, Switzerland needs to raise sufficient amounts for the National Roads and Agglomeration Transport Fund (NAF).
Thirdly, the Federal Council aims to boost the state budget as it is under an adjustment concept for the state budget.
The imminent withdrawal of the tax exemptions for electric vehicles will essentially charge each model’s imports with a 4% tariff based on the import price rather than the retail price. Despite the significant support of the majority of the parties, some remained disappointed with the said amendment. The Association of Swiss Automobile Importers Head Peter Grünenfelder asserted that it was “a black day for electric mobility in Switzerland” and it was “in stark contrast to the CO2 reduction targets for new vehicles set by the same government,” Bloomberg reported.
