Left envious politicians prevent the abolition of imputed rental value. Pensioners are asked to continue to pay and driven into misery

2023-05-01 11:10:21

Switzerland has one of the highest private debts in the world. With 277 percent of GDP, Switzerland was in third place among the OECD countries in 2021, well above the USA with 101 percent, Japan with 122 percent or the average of the four large EU countries (Germany, France, Italy, Spain) with 104 percent .

The reason for this is the high level of mortgage debt on owner-occupied homes, which, however, is offset by even larger assets on the assets side.

The household accounts for 2021 according to the SNB statistics show that the assets of private households of CHF 5,430 billion significantly exceeded the liabilities of CHF 965 billion. Cash and bank deposits alone accounted for 914 billion Swiss francs. The value of the real estate of 2402 billion compares with 897 billion Swiss francs of outstanding mortgages.

Even if the mortgagors and property owners are not congruent, many homeowners could easily pay off their mortgages, or at least partially reduce them, by using their savings to do so. But they don’t do it because their savings and account balances as well as their custody accounts give them a great deal of financial freedom.

However, many home builders also finance their own homes with borrowed capital because the mortgage interest paid is deductible from taxable income. But in return they have to pay tax on a fictitious income for their self-occupied home. This so-called imputed rental value is usually determined by the tax offices on the basis of comparable rents in the neighborhood. Imputed rental values ​​are also regularly increased due to inflation. Homeowners then have to pay more taxes, even though they don’t have any additional tangible income with which to shell out the higher taxes because of rising rents in the neighborhood.

The home must also be taxed as an asset. The state also collects property transfer fees and value-added tax on construction and maintenance work. In tax terms, homeowners are asked to pay the worst.

This problem particularly affects older people who bought their homes a long time ago and whose ambition was to pay off their homes while they were still working. As long as they earned a comfortable professional income, the tax burden was mostly bearable. But when they retire, the AHV and pension fund pensions are often not enough to pay the rising taxes. They then either have to vacate their house or take on new debt. But as is well known, banks are reluctant to give new loans to older people, because for the banks, the affordability of interest from current income is a criterion prescribed by the banking supervisory authority for lending. The income should be enough to pay 5 percent interest.

In terms of the tax system, it is correct that debt interest can only be deducted from taxable income if it is actually incurred in the achievement of a monetary benefit. But taxpayers should at least be able to choose whether they want to follow this tax practice, which is usually advantageous for them in times of high interest rates, or whether they want to do without it.

From an economic point of view, it makes sense to reduce the risks in the banking system by reducing public debt. Even partial repayments of the mortgage would improve the creditworthiness of the collateral deposited and thus the credit portfolios of the banks. There have already been several attempts to abolish this imputed rental value. But every time a bill was discussed in Parliament or voted on at the ballot box, left-wing politicians stirred up envy and resentment against homeowners. To them property belongs to the devil. But one should be glad that there are still people who pay off their homes and are therefore not a burden on the state in old age.