08 September 2021

Standardization of interest rates for late payment and refunds of taxes and duties from 2022 onwards

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The Federal Department of Finance (FDF) is standardizing the interest rates for late payment and refunds of taxes and duties. From 1 January 2022, the standard rate for interest on late payments and refunds will be 4 percent.

Currently, the interest rates for late payment are 3 percent (direct federal tax), 4 percent (value-added tax) and even 5 percent (stamp duty, tax on tobacco and beer, withholding tax, tax on automobile). Since there is no sound reason why on federal level different interest rates are applied on late payments, these are now regulated uniformly in the FDF Ordinance on Interest Rates on Late Payment and Refunds of Taxes (FDF Interest Rate Ordinance). The standard interest rate for late payment and refunds is now 4 percent.

Although the standardization of interest rates for late payment and refunds is to be welcomed, the 4 percent rate is still detached from regular market conditions. As of today, bank deposits hardly yield any interest, and in some cases negative interest rates are charged. In view of these market conditions, the interest on late payment of tax claims has an almost penal character. If, for example, a company is unable to settle a tax claim in due time by reason of a difficult economic situation (strong competitors, strength of the Swiss franc, etc.), it is additionally penalized by the high interest on late payment. However, interest on late payment should not have a punitive character. Nor is the interest on late payment intended to provide the state with an additional source of revenue.

The federal government often argues that low interest rates on late payment could have the consequence that defaulting debtors may pay outstanding tax claims at the end - i.e. only after the other claims that are subject to higher interest rates. This worse position of the financial administration would lead to lower revenues, would not be justified and should therefore be rejected. However, it may be countered that, for example, withholding tax or stamp duties are levied in a self-assessment procedure. Often, the taxpayer is not even aware that a certain business transaction triggers a tax liability and is only made aware of afterwards by the tax advisor or the tax administration. Said that, in many cases the interest on late payment is due not because the taxpayer does not want to or is not able to pay the tax claim, but because he was not even aware of the tax liability.

In summary, the standardization of interest on late payment and refunds is a step towards the right direction. However, the level of 4 percent is still too high in today's low interest rate environment.