déjeuner, 16 octobre 2023
From 2024, a higher VAT rate will apply in Switzerland. However, most traders will probably not increase the prices of their goods because of this.
For the first time in six years, the VAT rate is going up again. As a result of the AHV reform approved by the electorate, the standard rate will rise to 8.1 percent from the previous 7.7 percent. The reduced rate for food will increase to 2.6 per cent from the current 2.5 per cent.
A few days ago, the retailer Aldi Switzerland made a big announcement that it would not pass on the increase in VAT to its customers. Especially for food, where the tax goes up by 0.1 percentage points, the increase is hardly noticeable. For example, the VAT on half a kilo of Swiss cherry tomatoes with a retail price of just under 5 francs will only go up by about half a centime.
With more expensive products, such as a washing machine for 800 francs and the somewhat larger increase in tax, however, the difference is noticeable. In this case, the product theoretically becomes more expensive by about 3 francs. So the company has to cut this amount from the margin if it does not want to or cannot pass it on.
Aldi is probably not the only retailer that wants to bear the VAT increase itself. In any case, the managing director of the Swiss Trade Association, Bernhard Egger, assumes that many retailers will not pass on these additional costs to their customers.
This also has to do with the psychology of pricing, as he tells AWP: “Especially if the sales price is a so-called marginal price – for example 99.00 francs, 9.95 or even 4.99 – retailers will hardly increase it.”
According to studies from behavioural psychology, consumers are more willing to buy a product if it costs 9.90 francs than if it costs 10.00 francs. According to Egger, the idea of price psychology is likely to be weighted more heavily by retailers than a possible narrowing of margins due to the VAT increase.
Another point is the strong competition among the suppliers. “The competitive pressure tends to lead to retailers not passing on at least part of the additional costs to the end customers – as was the case in the past in connection with other price increases,” says Dagmar Jenni, managing director of the Swiss Retail Federation.
Various retailers have already announced on request that they intend to bear the additional costs themselves. “Migros as well as Denner and Migrolino will not implement any VAT-related price increases in January 2024,” writes the Migros Group on request. Lidl also points out that it will bear the additional costs and that the prices for customers will remain the same.
For others, the decision has not yet been made. “At the moment, it is not yet clear whether the VAT increase will lead to higher sales prices,” says Volg, for example.
It is not only the traders who are primarily active in the food sector and who therefore mainly have to pay the lower VAT rate that bear the costs themselves. Manor, for example, also states that “no fundamental price increase due to the higher VAT rate” is planned.
Other retailers have not yet decided. A spokeswoman at MediaMarkt, for example, said that it was not possible to make a prediction. And at Coop it is only said that an adjustment to 2.6 from 2.5 per cent in the food sector would be small anyway and the effects would therefore be “hardly noticeable”.
The fact that retailers are not increasing the price of their goods because of VAT does not mean, however, that shopping will not become more expensive. For example, 1 kilo of potatoes cost an average of 3.02 francs in September 2023, 5.3 per cent more than a year ago, according to figures from the Federal Statistical Office.
The reason for this is general inflation. Although many do not always pass it on immediately, inflation generally has a much greater impact than the increase in value-added tax.
©Keystone/SDA
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