The Swiss parliament has approved a proposal for the abolition of customs duties on industrial products and the simplification of the structure of the customs tariff possibly on January 1, 2022.
This measure, which will facilitate the importation of industrial products, will allow Swiss companies to have access to cheaper intermediate goods and to reduce their administrative burdens. It should also lower the price of imported consumer goods.
The prices of goods and services are on average significantly higher in Switzerland than abroad. Various factors contribute to Switzerland’s high cost island: on the one hand, high domestic wages and costs push up prices, and on the other hand, a series of tariff and non-tariff barriers to trade allow companies to partition the Swiss market and charge higher prices. In order to reduce these obstacles, the Federal Council approved, on December 20, 2017, the “Import facilitation” package, which includes the elimination of customs duties on industrial products.
Tariffs on industrial products, which now average 1.8% of the value of the goods, are already generally low. However, for some products, such as textiles and clothing, tariffs are significantly higher. While industrial customs duties previously protected Swiss industry from foreign competition, they now make the purchase of intermediate goods from abroad more expensive and weigh on consumers.
The current tensions in the international trade environment threaten the liberal world economic order. As an open economy characterized by a relatively small domestic market and strong integration into global value chains, Switzerland is particularly dependent on the smooth functioning of world trade. Optimizing the economic framework conditions helps to counter the negative repercussions of protectionist tendencies. The unilateral elimination of customs duties on industrial products is one of them: it lowers the prices of inputs and strengthens the competitiveness of Swiss companies in the face of international competition.
Content of the project
The project provides for the abolition on January 1, 2022 of customs duties on all industrial products in the general tariff appearing in Annex 1 of the Law of October 9, 1986 on customs tariffs. The term “industrial products” includes all goods except agricultural products (including fodder) and fishery products. In addition to the elimination of customs duties, the project includes the simplification of the structure of the customs tariff for industrial products.
Thanks to the elimination of industrial customs duties, importers in Switzerland will save on customs duties and taxes. In 2018, they paid 541 million francs for import duties on industrial products and 21.5 million francs for VAT and motor vehicle tax levied on customs duties. Added to this is the reduction in administrative costs for companies (100 million francs in 2016), which represents around 20% of all administrative costs linked to customs clearance.
Finally, the simplification of the customs tariff structure will facilitate customs clearance, further reducing administrative burdens for businesses. These reductions will strengthen the competitiveness of the Swiss economy and have positive economic consequences.
Thanks to the elimination of customs duties on industrial products, importing companies will be able to obtain intermediate goods more cheaply and thus lower their production costs. This measure will therefore strengthen the Swiss export economy. Overall, trade relations will become more efficient and competition will be strengthened. In branches where competition works, the reduction in prices will be passed on to consumers.
The complete abandonment of tariffs on industrial products also makes it possible to put an end to historical irregularities present in the customs tariff, in particular the divergence in the rates applicable to women’s clothing and to men’s clothing, which is often the result. subject to criticism.
Contrary to these advantages is a reduction in the Confederation’s revenue due to the reduction in customs duties and taxes collected. However, the Confederation and the cantons can expect an increase in tax revenue due to the expansion of economic activity, which should offset part of the revenue losses.
By unilaterally removing tariffs on industrial products, Switzerland is losing a bargaining chip in negotiations for new free trade agreements. However, industrial tariffs weigh much less than before in the negotiations, and many potential free trade partners already benefit from duty-free treatment for most of their industrial products under the tariff preferences granted to developing countries. development. As the positive economic effects of the proposed measure are clearly greater than the negative effects, the slight loss of bargaining power can be considered bearable.
Considering the benefits for businesses and consumers, the elimination of tariffs on industrial products was therefore supported by the majority of the participants in the consultation.
Source: Conseil National
Do you need support? Contact firstname.lastname@example.org to discuss your current challenge and explore solutions available to you.
If you enjoyed this, you might enjoy our trade and customs compliance newsletter. Give it a try!