Mo, Sep 26th 2022
Yesterday, in a voter referendum recognized as the most important one of the current legislature, the Swiss voted to reform their pension system, and rejected bills aimed at strengthening the Swiss debt capital market by cutting withholding tax, as well as a citizen initiative to ban factory farming.
Swiss citizens vote in referendums three or four time a year on a variety of issues that have ranged from cow horns to the abolition of the army. In fact, according to the Swiss Federal Department of Foreign Affairs, more than one third of all referendums ever held at national level worldwide have taken place in Switzerland. Yesterday, besides the nation-wide votes, 12 cantons and one commune also held their own referendums covering issues such as dental insurance, a decrease of voting age, financing of Vatican infrastructure, and the introduction of full-day schooling.
The gold standard for direct democracy
Direct democracy in Switzerland dates back to the Middle Ages at the commune level. To date, two cantons still maintain some of the more traditional forms like the Landesgemeinde, where votes are cast by a show of hands in the main square. In some places, men carry a sword and the assembly is announced by blowing a horn.
While the philosophy of direct and representative democracy dates back at least to ancient Greece and Rome respectively, modern direct democracy was first institutionalized during the French Revolution in the form of a controlling mandatory constitutional referendum and a citizen’s right to bring initiatives forward.
In Switzerland, the mandatory referendum was incorporated into the Constitution in 1874, and the popular initiative in 1891. Since then, the system has evolved, hundreds of bills have been challenged, and hundreds of popular initiatives brought to the polls – only a few have become law.
In the canton of Appenzell, citizens still vote by a show of hands in the public square.
Today, there are three types of national votes (Read more on the “magic formula” of Swiss government). Swiss citizens receive their ballots by mail and have the choice to mail it back, drop it off at polling centers, vote online, or cast their vote in person at a voting station. Less than 10% choose this last option. If done in person, the Swiss always vote on Sundays. Spühler Pascal, in charge of one of Geneva’s 17 polling stations, says turnout tends to be around 200 people, depending on the issue. He stresses the value of the work his team of about 10 volunteers are doing.
Over the last few decades, there has been a proliferation in the number of issues put to vote. While some votes make for good headlines and others are disqualified as populist measures, the alpine country has been dubbed the gold standard for direct democracy because it allows every citizen to propose and have a say on any issues of public policy.
But Switzerland is not the only country to have popular votes on issues with binding results. These are in fact part of the political system in at least 50 countries worldwide. Moreover, the EU also has a mechanism to bring citizen initiatives forward. In the United States, more than half the states feature some sort of direct democracy with California illustrating the perils of such systems, particularly that of ill-thought-out citizen legislation.
What are the advantages of the Swiss direct democracy?
The constant voting requires investment in time and resources from the government and political parties. But it allows for engagement between parties and citizens, as well as a reasonably informed debate: the government produces informational material showcasing various arguments in all four official languages, as well as in sign language.
Sylvain Thévoz, legislator and PS representative at the committee supporting the referendum against the abolition of withholding tax, compares it to a soccer match where you train and then go play.
“You debate internally, you decide on a party line, and then you go in front of the population. Every three months you have results. This allows us to understand what the population wants and to define how the party will position itself,” he said.
Even though most popular initiatives fail at some point of the process, they serve as an agenda-setting mechanism allowing citizens to bring issues of their interest to the national debate.
When a petition reaches at least 100,000 verified signatures, it is eligible for a voter referendum.
Aaricia Merat, an animals’ rights activist who collected signatures for the popular initiative against factory farming was aware that the population would refuse the initiative. While blaming the impending loss on misinformation by the federal council and improper pressure tactics, she still underpinned the importance and value of these elections.
“The goal is to sensitize the population,” she said, adding “Even if we don’t win, we get to make people talk about important topics and then prepare the terrain for upcoming initiatives that may have a better chance. It allows us to make public opinion evolve little by little.”
The referendum, besides creating the real possibility to reject parliamentary or government proposals, serves as an indirect mechanism that encourages lawmakers to take the electorate into account.
Swiss Parliament is made up of two chambers – the National Council and the Council of States. The 200 representatives in the National Council represent the people, while the 46 members in the Council of States represent the cantons.
What do yesterday’s results mean?
With a 52 percent turnout, the Swiss adopted the proposed pension reform in a narrow vote (50.6 percent voted in favor). Women’s retirement age will now increase from 64 to 65, gradually and continue to compensate women who are closest to retirement age. Additionally, VAT will increase up to 0.4 percent in order to finance the state-backed Old Age and Survivors Insurance (OASI), one of the three pillars of the Swiss pension system.
OASI was established in 1948 and has been reformed multiple times, last in 1997. Since then, there were several attempts at reform that did not come through. A similar bill to the one just approved was rejected by nearly 70 percent of voters in 2004, another one was dismissed by parliament in 2010, and the most recent one was defeated by 53 percent of voters in a referendum in 2017.
This time, parliamentarians seem to agree on the urgency of balancing OASI’s budget, which is threatened by an increased life expectancy and an ageing population. While there were fierce debates on some of the measures, the project was approved sweepingly with 126 votes against 40 (27 abstentions) in the National Council and unanimously in the Council of States.
But the public wasn’t convinced. The Swiss Trade Union Federation (USS in French), the Social Democratic Party (PS), the Green Party, and several feminist organizations launched a referendum by collecting over 150,000 signatures. They argue that the pay gap and unpaid care work by women call for compensation measures like the earlier retirement age. They also oppose to financing the pension system through VAT – a tax that’s harshest on those with the lowest income – and caution of an impending reform that aims at increasing retirement age to 67 for both men and women.
To be fair, Swiss citizens have one of the lowest retirement ages of all OECD countries, both in the present and future (based on adopted measures) and it was until today one of the few European countries to have different retirement ages for each sex, together with Poland, Hungary, and Turkey. It also has an exceptionally low VAT, less than half of the OECD average.
Political power is decentralized in Switzerland by the federal government, cantons and then districts which include one large city or a collection of smaller villages.
In another close call (52 percent against), the population rejected the government’s proposal to exempt foreign investors from the 35 percent withholding tax and to partially abolish Swiss transfer tax stamp. Voters had rejected another initiative to cut the transfer tax stamp earlier this year in a PS-called referendum. Besides the fiscal cost of the measure and the lack of benefits for the bulk of the population, opponents were concerned about an increased level of tax fraud, as the possibility of reimbursement of the withholding tax serves as an incentive to properly declare this income.
“For us, what’s at stake is transparency, public finances, and the fight against tax fraud,” said Mr. Thévoz, who sees the initiative as part of a current of de-regularization that the right majority in parliament is promoting. For him, there is little need for optimization given that Switzerland is already a global leader in asset management, and certainly not at the expense of public finances and transparency.
Finally, the Swiss were more decisive in saying no to a popular initiative to ban factory farming (63 percent against). The measure, proposed by animal’s rights and environmentalist groups, would have obliged Swiss producers to adhere to Bio 2018 standards as a minimum and provided them with a 25-year adaptation period. It was deemed inadequate or unnecessary by the opposition, as well as unbearably expensive for producers.
The 37 percent of voters supporting the measure contrasts with the 6.2 percent of market share currently displayed by the organic meat and fish Bio 2018 market. Switzerland features some of the most progressive measures in farming, but apparently the population is not ready to pay more for their food to better treat animals and that may be a better start than the ballot box.
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