Taxes in Vaud: what the 12 per cent vote would change

The canton of Vaud is gearing up for a closely watched referendum on taxation. On 27 September 2026, citizens will be asked to vote on the popular initiative ‘Tax cuts for all – Restoring purchasing power to the middle class’, often summarised simply as the ‘12 per cent initiative’. The text calls for a 12 per cent reduction in cantonal income tax and cantonal wealth tax for individuals, with the measure due to come into force from the 2027 tax year if approved.

For households, the self-employed and SME managers resident in the canton, the implications are immediate: a reduction in the cantonal tax bill can boost disposable income. But for businesses, the debate goes beyond the amount saved on a personal tax return. The issue also concerns the quality of public services, the financial relationship between the canton and the municipalities, the potential pressure on local budgets and, indirectly, the environment in which an SME recruits, invests and sets its prices.

A reduction targeted at the cantonal share, not the entire tax bill

The first point to clarify is essential to avoid misunderstandings: the announced 12 per cent would not apply to all the taxes paid by an individual. According to information published by France 3 Régions, the initiative concerns cantonal income tax and cantonal wealth tax. It does not provide for a reduction in municipal taxes. Municipalities would therefore retain their tax coefficient and the revenue directly linked to their own taxation system.

In practical terms, a taxpayer in Vaud should not interpret this proposal as a uniform 12 per cent reduction in all their taxes. An individual’s tax bill comprises several components. The cantonal portion is one of them; the municipal portion is another. Depending on the municipality of residence, the relative weight of each may vary within the overall tax burden. For a self-employed person, a shareholder-director or a partner in a partnership, the actual effect would therefore depend on their personal circumstances: taxable income, taxable wealth, municipality of residence, available deductions and remuneration structure.

This distinction is particularly important for SME owners, who sometimes conflate personal taxation and corporate taxation in their economic assessment. The initiative concerns individuals, and does not involve a direct reduction in corporate tax on profits. It may, however, affect entrepreneurs through their personal taxation: salary, dividends, private wealth, company shares, privately owned property or income from self-employment. A trust company will therefore need to analyse the impact on a case-by-case basis rather than relying solely on the ‘12 per cent’ slogan.

Purchasing power at the heart of the campaign

The initiators are promoting the text as a means of restoring purchasing power to taxpayers in Vaud. The initiative was tabled in April 2023 and gathered 28,486 valid signatures, whilst 12,000 were required for it to proceed, according to France 3 Régions. It enjoys the support of a large section of the local right, notably the PLR, the UDC and the Green Liberals, as well as business circles.

The political message is clear: to ease the tax burden so that households can keep a larger share of their income. In an SME, this argument can resonate with employers and employees alike. When personal expenses rise or disposable income becomes stretched, salary discussions become more sensitive. A reduction in income tax can help ease this pressure on employees, even if it is no substitute for a coherent pay policy or a full analysis of staff costs.

For the self-employed, the issue may be even more immediate. Business income is often taxed at the individual level, rather than through a separate company. A reduction in cantonal income tax could improve personal cash flow, facilitate certain financial decisions or provide some breathing space at a time when operating costs are eating into margins. But here too, the effect will depend on the structure of the income, deductible expenses and family circumstances.

It should also be borne in mind that a tax cut does not have the same impact depending on whether the taxpayer pays a lot, a little or no cantonal tax. The higher the taxable income, the more significant the absolute gain is likely to be. This is one of the points contested by opponents, who criticise the measure as unfair and a threat to public services, according to views reported by France 3 Régions, citing RTS.

A canton already committed to a broader tax plan

The debate in Vaud is not taking place in a vacuum. The State Council has already launched a so-called ‘purchasing power’ plan, comprising measures worth around 345 million francs, according to France 3 Régions. This package includes income tax cuts, as well as measures relating in particular to health insurance premiums, childcare costs, inheritance and gifts, and property wealth.

This is where the debate becomes more complex for businesses and their advisers. The cantonal authorities maintain that the measures already adopted enable taxpayers to be helped in a more targeted manner, whilst better safeguarding public finances. Supporters of the initiative, on the other hand, believe that these reductions are insufficient given the tax burden felt by the people of Vaud.

For an SME, the difference between a general reduction and targeted measures is not merely theoretical. Support for childcare costs, for example, can influence the ability of certain parents to work. Measures relating to health insurance premiums can affect households’ disposable income. Changes concerning property assets or inheritance can have an impact on an entrepreneur’s wealth planning, particularly when a property or a family business becomes part of their private assets.

Taxation is therefore not merely a line item on a tax return. It shapes personal and business decisions: whether to pay oneself a salary or a dividend where the structure allows, to reinvest in one’s business, to pass on assets, to take on staff, to remain in the canton or to compare different locations in which to set up a business. It would, however, be unwise to jump to conclusions before the vote and before knowing the final implementation details should the initiative be accepted.

A shortfall of 272 million in revenue: why local authorities are concerned

According to current estimates by the State Council cited by France 3 Régions, the initiative’s acceptance would result in an additional loss of 272 million francs in tax revenue each year, taking into account the tax cuts already planned by the government. Together with the measures in the ‘purchasing power’ plan, the cumulative tax relief would amount to 617 million francs compared with the previous situation.

These figures explain the authorities’ caution. The State Council is working on a plan aimed at restoring the balance of the canton’s finances by 2030. Certain aspects of this plan depend on the outcome of the vote, as the scope for budgetary manoeuvre would vary depending on the result. The State Council and the Grand Council recommend rejecting the initiative.

The Union of Vaud Municipalities is also calling for a ‘no’ vote. It fears that a further reduction of 272 million francs would undermine financial relations between the canton and the municipalities. The organisation points out that several agreements have been concluded in recent years to rebalance these relations. Its concern centres on a well-known scenario in public finance: if the canton has less revenue, certain costs could be passed on to the municipalities. The latter might then have to cut certain services or raise their own taxes, according to the analysis reported by France 3 Régions.

For SMEs, this municipal aspect warrants serious attention. A business operates within a specific local area: it depends on roads, transport, planning permission, schools that attract families, childcare facilities, security, training and an administrative framework capable of responding within a reasonable timeframe. If financial pressures arise at local authority level, they may result in budgetary decisions that indirectly affect the local economy.

This is not to say that such effects would occur automatically. However, a business leader should avoid focusing solely on immediate private tax savings. A cantonal tax cut may be partially offset, in the long run, if other local authorities adjust their services or tax rates. This is precisely one of the sticking points in the current debate.

What a trust company should prepare for before 2027

At this stage, no SME in Vaud should alter its planning on the basis of an outcome that is as yet unknown. However, the vote does justify preparing scenarios. For the self-employed and business owners taxed as individuals in the canton of Vaud, a tax adviser can already identify sensitive cases: taxpayers subject to high cantonal tax rates, holders of taxable wealth, entrepreneurs nearing a business handover, property owners or individuals whose income comprises several different sources.

The right approach is to distinguish between three levels. Firstly, the personal impact: what proportion of the total tax burden do the cantonal share of income tax and wealth tax represent? Next, the business impact: could an improvement in personal cash flow influence a capital contribution, a repayment of an overdraft, an investment decision or the ability to weather a more difficult period? Finally, the local impact: could the local authority of residence or place of business be affected by future budgetary trade-offs?

Employers should also monitor the debate from an HR perspective. A change in tax policy can influence the perception of take-home pay, even if the employer has no control over the personal taxation of its staff. In a tight labour market, understanding disposable income becomes a key talking point. However, caution is required: personal taxation depends on individual circumstances, and a company must not turn a political assumption into a salary promise.

From an accounting and tax perspective, the priority remains data quality. A useful projection requires up-to-date tax information, a clear picture of income, assets, liabilities, deductions and the relevant local authority. If the initiative is accepted, we will have to wait for the implementing details and check how tax software, advance payments and payment planning will be adapted for the 2027 tax year.

The vote on 27 September 2026 therefore goes beyond the question of an attractive percentage. It pits two perspectives on tax competitiveness against one another: one favours broad tax relief to boost purchasing power, whilst the other fears a weakening of public finances and the burden being shifted onto local authorities. For SMEs in Vaud, the answer will not be found in a slogan, but in a detailed analysis: potential tax savings, stability of the local regulatory framework, labour requirements, cash flow and investment capacity. It is on this practical ground that the debate over the 12 per cent figure deserves to be followed.