In the canton of Vaud, the battle over the 12 per cent tax rate begins

The campaign for the Vaud ‘12 per cent’ initiative has been launched. Backed by the PLR, the UDC and representatives from the business community, the proposal calls for a 12 per cent reduction in cantonal income and wealth tax. Supporters present the measure as a correction of a tax injustice and as a way of giving the middle class some breathing space.

For Vaud’s SMEs, the debate is not limited to a campaign poster. A cut in personal tax can alter households’ disposable income, influence certain consumer decisions, affect wage negotiations and change the canton’s budgetary landscape. The self-employed and business owners are also directly affected, as their personal tax burden can form part of the overall balance between their remuneration, tax deductions and wealth planning.

A cantonal rebate presented as simple and uniform

The initiative aims for a 12 per cent rebate on the Vaud cantonal income and wealth tax. According to the information presented by its supporters, the reduction would apply to all taxpayers liable for this cantonal tax. The leader of the SVP group in the Grand Conseil, Cédric Weissert, has therefore argued in favour of a ‘fair’ reduction, on the grounds that it would affect ‘everyone’.

This distinction is important for businesses and their advisers: according to available sources, this is not a reform of corporate profits tax or capital tax. The announced measure targets cantonal tax on individuals. A public limited company or a limited liability company would therefore not, based on the published information, see a direct reduction in its own tax liability. However, its shareholders, partners, employees or directors resident in the canton might notice a change in their personal tax bill if the initiative were accepted and implemented.

Supporters have given specific examples: for a couple with two children and a taxable income of 125,000 francs, the annual saving would be around 1,200 francs. For a single person without children with a taxable income of 80,000 francs, the saving would be 870 francs. These figures illustrate the order of magnitude put forward in the campaign, but they are no substitute for an individual tax calculation. Under the Swiss tax system, the outcome depends in particular on family circumstances, taxable income, assets, deductions and the municipality of residence.

Why business leaders in Vaud are following the issue closely

The initiative committee argues that tax relief can support the local economy. Aurore Müller Gaudard, a business leader active in the electricity and renewable energy sectors, explained that additional resources in household budgets could facilitate investment in solar panels, charging points or home renovations. According to this view, the money saved on tax could flow back to local businesses, their suppliers and their employees.

For an SME, this line of reasoning must be approached with caution, but it touches on very concrete realities. In sectors such as housing, energy, renovation work, electric mobility, retail or household services, customers’ disposable income plays a role in the timing of orders. A household with a more comfortable budget can bring forward a project, opt for a more comprehensive solution or be less likely to cut back on non-essential spending.

A company’s financial adviser can help translate this context into practical decisions: revising turnover forecasts using multiple scenarios, anticipating cash flow requirements in the event of a rise in demand, monitoring margins on quotations, and avoiding confusing market momentum with sustainable profitability. An increase in orders is only positive if it is invoiced correctly, paid on time and manageable for the teams.

This issue also affects the self-employed. For one simple reason: for them, the line between business income, personal tax liability and personal cash flow is often clearer than in a limited company. If the cantonal tax burden decreases, this may improve one’s ability to save, make it easier to pay tax instalments or bolster one’s safety net. However, one should not base a strategy for tax payments or investments on a measure that is still subject to a vote and the terms of its implementation.

Cantonal tax, local authorities and instalments: the details that matter

One point highlighted by Jerome De Benedictis, leader of the Green-Liberal group in the Grand Council and mayor of Echandens, is that the initiative would have ‘no effect’ on municipal finances. For taxpayers, this serves as a reminder that the tax bill comprises several tiers. A reduction in the cantonal share does not necessarily mean a proportional reduction in everything shown on the final tax statement.

In practice, taxpayers in Vaud receive instalments, followed by a final statement based on the tax assessment. For a business owner, a senior employee or a self-employed person, the issue is not just the final amount: it is also the payment schedule. A change in tax rules can have cash-flow implications if the instalments no longer reflect the actual situation. Should the initiative be accepted, it will therefore be necessary to check how the tax authorities will adjust the instalments, from when, and according to which specific rules.

Rhône FM reports that supporters are suggesting implementation as early as 2027. This information is crucial for planning purposes. An SME advising its staff, or a trust company supporting self-employed individuals, must avoid jumping to conclusions: a ‘yes’ vote does not necessarily mean an immediate impact on cash flow the following month. The date of entry into force, the administrative procedures and the taxes concerned will need to be confirmed by official legislation.

For businesses, it may be useful to distinguish between three plans. The first is tax-related: which taxpayers are affected, over what periods, and for which specific taxes. The second is budgetary: what impact will this have on the disposable income of clients, owners and staff? The third relates to accounting and HR: do we need to adjust pay forecasts, requests for advance payments, profit distributions or internal communications? Each of these areas requires a separate analysis.

The debate on public finances: an issue for SMEs too

Opponents on the left fear cuts to public services. Supporters reject this argument and believe the canton has sufficient financial leeway. According to Rhône FM, the estimated shortfall for the state would be 272 million from 2027 onwards. Supporters of the initiative consider this shortfall manageable and point to liquid reserves of 3.2 billion. Olivier Feller, a PLR National Councillor and committee member, asserts that there would be ‘no cuts’.

These arguments are part of the political debate, but they are of direct interest to businesses. Public finances influence the economic environment: infrastructure, training, administrative processing times, social benefits, healthcare, support for certain investments, and the state’s ability to process applications swiftly. An SME does not vote merely as an indirect taxpayer; it operates within an ecosystem whose quality also depends on public services.

The initiators criticise what they regard as avoidable expenditure. Sources cite, in particular, the potential cost overruns of an IT system at the CHUV, initially budgeted at 200 million, as well as a rise of nearly 50 per cent over ten years in the communication expenditure of the State Council and senior civil servants. These examples are used in the campaign to support the idea that curbing expenditure would make it possible to fund the tax relief.

For a business leader, the issue is not to pass judgement here on cantonal budgetary policy, but to understand the risk of a second round. If a tax cut were to be offset later by other measures – such as changes to other taxes, a reduction in services or budgetary trade-offs – certain sectors could be affected to varying degrees. Businesses operating in public procurement, healthcare, construction, education, social services or community services will therefore be following the debate with particular attention.

Remuneration, dividends and planning: don’t jump to conclusions

The campaign emphasises the middle class and purchasing power. Olivier Feller describes Vaud’s tax system as ‘voracious and punitive’ and argues that a middle-class taxpayer in Vaud can pay twice as much tax as in the canton of Zurich. The director of the Vaud Real Estate Chamber, for his part, describes the reduction as moderate, bringing cantonal taxation down from a level considered extreme to a more reasonable one, whilst remaining in the upper half of the national average, according to the comments reported.

In an SME, these factors may fuel discussions on pay policy. Whilst employees may see a reduction in their personal tax bill, this is no substitute for a pay strategy, but it can alter their perception of their net disposable income. Conversely, rising costs, insurance premiums, rents or transport costs may continue to put pressure on personal budgets. A prudent employer will therefore avoid using any tax reduction as an automatic justification for curbing pay rises.

For executive shareholders, the issue may be framed differently: striking a balance between salary, dividends, pension provision, expense reimbursements and the build-up of reserves within the company. A change in the personal tax burden may alter this balance, but only marginally and following a thorough analysis. Social security contributions, insurance cover, borrowing capacity, occupational pensions and the stability of the company must remain at the heart of the decision.

The right approach, from the fiduciary’s perspective, is to prepare scenarios without promising certainty. A table comparing the current situation, a ‘yes’ scenario and a ‘no’ scenario can help clients visualise the possible outcomes. This will need to take into account instalments, outstanding tax assessments, family circumstances, assets, ancillary income and investment plans. Campaign figures provide an indication; individual tax assessments reflect the reality.

The initiative will be put to a public vote on 27 September, according to La Télé. Until then, the debate will pit two visions against each other: on the one hand, a tax cut presented as a means of boosting purchasing power and local economic activity; on the other, the fear of a weakening of public finances. For SMEs in Vaud, the key is not to remain mere spectators. Even though the measure is primarily aimed at individuals, it may influence the behaviour of customers, employees and owners. In taxation, as in business management, the advantage will go to those who have prepared their figures before the outcome of the referendum dictates the timetable.