Switzerland: Proposed environmental tax measures, increased CO2 tax levy

The legislation is designed to encourage businesses to take action to reduce further their CO2 emissions.

The legislation is designed to encourage businesses to take action

New environmental tax measures proposed under a revised Swiss carbon dioxide law (CO2 law) could affect the profitability of businesses beginning in 2022, when the law is expected to be effective. The legislation is designed to encourage businesses to take action to reduce further their CO2 emissions.

Assuming that the revised CO2 legislation is approved by a voter referendum on 13 June 2021, the new rules may result in potentially increased tax liabilities for businesses operating across various sectors including oil and gas, manufacturing, automotive, and transportation industries or sectors.

An increase in the CO2 tax levy and the various penalties to which companies could be subject in case of failure to comply would be costs that could affect their profitability and challenge their current business model.

Sectors that may be affected include:

  • Businesses using thermal fossil fuels: The proposed CO2 law would provide for an increase of the CO2 levy on thermal fossil fuels. As a result, all businesses using thermal fossil fuels—such as heating oil, natural gas, and coal—could be affected by the increase of the CO2 tax levy. Those that commit to improve the efficiency of their installations with regards to CO2 emissions by a certain factor each year until 2030 would, however, be able to avoid an increase in their tax liabilities by claiming a refund of the CO2 levy.
  • Oil industry: With the proposed CO2 law, producers and importers of fossil fuels in Switzerland would have to compensate a higher rate of their CO2 emissions. In instances of a failure to comply, the new measures would result in greater penalties that could not be offset by a surcharge on fuel, resulting in a potential loss of profitability. 
  • Automobile industry: Automotive manufacturers and importers would be subject to progressively tighter CO2 emission targets for new passenger cars and new light commercial vehicles. New target values would also be introduced for heavy commercial vehicles imported into or produced in Switzerland.
  • Real estate and construction sectors: According to the proposed CO2 law, new buildings constructed as of 2023 would not be allowed to generate CO2 emissions. Stricter CO2 emission thresholds would also be imposed with respect to existing buildings.
  • Airlines and private jet operators: With the aim to encourage the use of alternative means of transport, the proposed CO2 measures would impose an incentive tax on flight tickets and private jet flights departing from Switzerland. 

KPMG observation

Given the new measures proposed in the CO2 law (if approved by the voters) would be effective in 2022, companies need to consider assessing any potential future tax exposure and their sustainability objectives. The proposed CO2 law may give a significant competitive advantage to businesses that develop a strong sustainability strategy and that have eco-friendly production methods. There may be opportunities under the proposals for sustainable investments and innovative technologies.

Read a May 2021 report prepared by the KPMG member firm in Switzerland



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