Switzerland scraps tax exemption for electric cars

Switzerland is stepping on the brakes and will eliminate the tax exemption for imported electric vehicles. The move aims at bolstering tax revenue for its road infrastructure. The Swiss Automobile Importers Association reacts with disappointment and fears that it will undermine the uptake of electric mobility in the country. The exemption policy has been in place for the past 26 years.

The Federal Council, Switzerland’s government, emphasizes that it needs to address tax losses and ensure contributions to the fund for national roads and agglomeration transport (FORTA). The change comes through an amendment to the Ordinance on the one-off purchase tax on motor vehicles in Switzerland. The Federal Council stated that taxing electric cars aligns with the program adopted earlier in 2023 to consolidate the state’s finances.

Sixfold increase

Since 1997, electric cars have enjoyed exemption from the 4% import tax on motor vehicles used for transportation, a measure initially implemented to promote electric mobility. However, the surge in annual imports of electric cars, from approximately 8 000 in 2018 to over 45 000 between 2018 and 2022, has led to a significant decline in motor vehicle tax revenue.

“Between 2018 and 2022, the number of electric cars imported each year increased almost sixfold,” the Federal Council points out. The body estimates a loss of around CHF 78 million (€81 million) for 2022 and anticipates a further decrease between CHF 100 and 150 million (€103 to €155 million) in 2023. If the tax exemption continues, cumulative losses could reach CHF 2 to 3 billion from 2024 to 2030 (€2,07 to €3,10 billion).

Hampering progress

The Federal Council aims to counteract these losses by subjecting electric cars to taxation. Additionally, the government highlighted industry expectations that the cost of producing electric vehicles will align with fossil fuel vehicles by 2025, potentially without consumer price increases or the need for state subsidies.

In response to the decision, Auto-Suisse, the Swiss Automobile Importers Association, expressed annoyance, arguing that the move undermines electric mobility and contradicts efforts to reduce CO2 emissions from new vehicles. Peter Grünenfelder, President of Auto-Suisse, criticized the decision, stating that it hampers progress toward the goal of a 57% reduction in CO2 emissions from the transport sector by 2040.

The Federal Council’s decision to extend the car tax to electric vehicles starting in 2024 has sparked concerns about the impact on consumers and the automotive sector’s efforts to promote zero-emission vehicles. The new rules don’t affect the other consumer’s benefits, which depend on canton policies in Switzerland. Some, like Basel, reimburse 20% of the purchase price of purely electric vehicles.