Financial awareness in the society

I read today that 50% of people don‘t know that the 2nd pillar is part of their net worth. We might be one of the richest country in the world but that doesn‘t mean the average Joe know their stuff about finances.

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Totally agree… and most of the people i speak with they don’t know that with 3rd pillar they can save on taxes, and they think its just a waste of money. They are like : why would i lock my money for 30 years if i can have them with me now and spend them now…

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Many would only care about and count their liquid assets - which the 2nd pillar isn’t. :wink:

Well, most 20-year olds have just begun working. I can kind of understand that they want prefer to treat themselves to something nice after earning their first own “proper” money.

To be fair, many 25 or even 30 year olds won’t have much in their 2nd pillar (retirement savings are only becoming compulsory at 25).

Even for me being a bit older, 2nd pillar makes up only about one seventh of my net worth (only half of what I’m holding as much in pillar 3a, even without ever having been self-employed).

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I do know it, but I don’t count it. Where do you put me on that statistic? :smiley:

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We here on the forum are probably the 1/1000 that know their stuff around money

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To be fair, the Federal Statistics Office derives its data from tax forms and, as such, doesn’t count it either, nor 3rd pillar assets, for that matter. I’d also wager that most people don’t care about their net worth at all. The main reason it matters to us is because we use it to compute our early retirement needs, most people don’t think about retireing before age 64/65.

I moved this side discussion to a separate thread.

From my side I can add a few funny numbers:

  • 50% Poles think they don’t pay the VAT
  • 21% Poles think they don’t pay any taxes

I think it is crucial for the people to know that they DO pay taxes and how much. Only when we see how much is taken from us and what do we get for it, do we begin to get the full grasp of the efficiency of the public sector.

Some politician in Poland once said that the government has prepared some program to give money to the people, and if you don’t like it then you shouldn’t take it. This is a very twisted logic. The government does not have its own money and handing out money does not turn it into a good guy.

That’s why I think that the following adjustments could make it more visible to the average Joe, how much the government takes:

  • each employer pays the employee the exact amount stated in the job contract and he pays nothing on top of that. It is the sole responsibility of the employee to pay his taxes and contributions. There should be no division of labor taxes between the employer and the employee, it only makes it more opaque. You earn money through work, you’re responsible for your taxes.
  • in the USA there is no VAT, there is the sales tax. In the shop you will see net prices everywhere, what the producer really gets. Then you get to the counter and see what the government charges on top. Some states charge nothing, some charge 20%, etc. This is transparent. Maybe it’s a bit inconvenient when dealing in cash, but we’re moving more and more to electronic payments.
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to be able to measure efficiency we should have a way to measure what the governemnt is doing and what would be the cost/impact on society without government intervention.
I think it’s almost impossible to calculate the above.

It’s a pity that in most Gemeinde as a foreigner you cannot run for office. In Ticino each town has usually two political assembly, the Municipo (executive, 5-7 people) and the consiglio Comunale (20-40 people dpeending on town size). I was part of a Consiglio Comunale of a small town with 100% multiplier on taxes. You get to vote on the budget and see where the money goes and discuss and propose changes. There was basically no way to move budget around: snow clearing of streets and mantaining the water system were consuming almost the entire budget, with something left to keep the school running.

I’m not saying that the same applies on a federal level, is just that I think in Switzerland we are already spending the money quite well.
By the way the amount of transaprency in town finances is remarkable - a lot of people (mostly Swiss maybe?) that gets elected and cares about it have good understanding of finance - maybe not on personal investment and ETF; but for sure on how a town runs.
Particularly in small town where there are noraml people in the political assemblies. Large cities suffers from a professionalizzation of politics unfortunately. That’s why I have a divided opinon on fusion of towns - while more efficient, I think it makes for more financial awareness to keep the budget of a town at the proper town level, not some enormous invented suburban sprawl, with normal people getting elected and needing to confront themsleves with budget issue.

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Finances are a dry topic, boring and slow, and oftentimes unnecessarily complicated [EDIT: For most people except us here in this strange and little forum :smiley: :wink: ]. I guess it’s always been like that, that most people just don’t know and don’t care.

What’s changed, IMO, is that personal finances are becoming more and more important. I haven’t seen any forecast that says that the younger generations not need to worry about their financial future.

But yes, it’s slightly disconcerting when you see a 40+ year old telling you that they don’t how much they have in their 2nd pillar, not even ballpark. Or when they hear you talk to a colleague about 3rd pillar investments, and join the conversation saying “you guys are nuts, trusting those social systems, don’t you know they’re about to collapse, you’ll loose all your money” and then it turns out they thought AHV and 3a were the same.

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I will move to another country if this happens even here. I fully agree with transparency, but the way it works in the US is an abomination, clearly made for profit reasons. Worse than the “Tipping tax” they also have.

I don’t really care if for economists it’s more transparent. Whoever need to compare how much stuff costs between states should suck it up and do the calculation themselves.

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Sure, it’s not easy, but I think increasing transparency is a step in the right direction? It’s not good if people who vote don’t know the extent of the taxes that are being levied on them already. Then if some politician says “we need to increase taxes, mostly for the rich”, such a person will think “sure let’s do it, I don’t pay it anyway”.

Pay the taxes yourself, I think that would make an appropriate psychological effect. If you never even see this money come to you and then go away, it’s out of sight, out of mind.

What are you talking about? If I sell you a product for $100, you give me $100 and I get $100, simple. If government comes and says: ok, for this sales transaction we put 20% on top, then you pay $120, the government gets $20 and I get $100.

With VAT you just pay $120 and have to check the bill to see how much tax was in. It’s a fine difference, but with sales tax you can set the same price for all cantons and then each canton could put their own tax rate on top. Cantons compete on income tax rates, why couldn’t they compete on sales tax? Tax competition is a good thing, as it breaks state monopoly on taxation.

I’m talking about what the people sees, not the difference between the two taxes.

Why not? Why should the employee pay all his contributions?

While a 50-50 split in contributions may be arbitrary, the employer is deriving from public and government services. The government, for instance, provides occupational education for (almost) free and loads of public infrastructure and services that are directly serving employers. So why shouldn’t the employer that is deriving a benefit from such services pay taxes and contributions?

So is efficiency. Not only on government services but also in everyday transactions for consumers.

Here’s the thing: Hardly any consumer wants to check the bill and see how much tax is included.

The great majority of consumers, I dare say, just want to know the final price - how much money they have to pay. Obfuscating the final prices from them may be transparent - but it’s neither efficient for budgeting and payment transactions.

And the few customers that do want to check the bill for tax, they easily can - because the amount of tax is shown on their Swiss bill today. Displaying net prices is shoving something (the tax amount) into people’s faces that they few want to know.

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Not necessarily. It’s not necessarily efficient either. On the basis of an economics textbook it may be - but less so in real life. Beginning with issues of intercantonal sales, for starters.

Since you’re advocating employees should pay all their taxes and social contributions themselves, surely so should consumers, shouldn’t they?

Since VAT is what you are charged (not the seller of a product) by the government, surely you wouldn’t or shouldn’t have pay Basel’s VAT tax rate when ordering something as a resident of Zürich, do you?

I agree that the U.S. way of not displaying sales tax is an abomination. But yes it will be better if people were actually aware of how much they are paying to the state. On the other hand, I cannot imagine average joe contributing to AHV, etc. If I recall correctly Switzerland is the last country in Europe where citizens and people with C permits are charged yearly for their tax bill… France abolished this system couple of years ago because people did not budget for their taxes…

I am not sure, but is Switzerland not one of the most transparent and participative countries concerning money spent.

I mean the community can actually vote if they seem the budget fit for the renewal of a wastewater treatment plant. Never have seen that anywhere else.

Furthermore, you know exactly how much taxes you pay. I prefer largely the system where you can get the full price on the price tag then the VAT separatly but anyway VAT is also transparently written on the receipt…It was a pain in the ass with that stupid GST (Indian acronym for VAT).

So basically, you know exactly how much you pay in taxes, and how much gets paid in everything.

BTW, I still have trouble to understand where for instance Germany is paying so much more, that Switzerland gets away with so low tax rates. Is it just because companies/people transfer their wealth over here (more or less legal tax optimisation"), or is it just that there is less subventions (KITA, train (depends on Kanton when you see the difference in Abo costs between ZH and BS/BL for instance).

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AS the others said information is there, if you are interested you have a look.

Going back to the topic, I believe here in CH, there is much more financial awareness than in other places. I believe is because the people is wealthier or the system is more transparent.
At least people know that exist and you receive a paper in a yearly basis on how much do you have in your pillar 2, 3. In other countries like Spain the pillar 1 and 2 it’s your public pension that you have no idea on how to calculate it, as they are so many factors that contribute to it.

you’re contradicting yourself here. I’m for making it even more transparent / evident. I agree that in Switzerland it is a bit more transparent than in some other countries. Also, I’m not entirely convinced that sales tax would really be better, could be wrong. Just setting some ideas up for discussion.

Is that the direction we want to go? People not being expected to budget for their tax expense? What next? Mandatory adult diapers in case you “forget” to go to the toilet? :smiley:

The system is convoluted. What difference does it make to the employer or the employee if this thing they’re paying is called a tax or a contribution, how much goes for which contribution. You mostly should care how much goes into the 2. pillar, because for the rest it doesn’t matter how much you pay.

Similarly, it makes no effective difference if a tax is paid by the consumer (in case of labor, employer) or the producer (employee). Setting the gross salary somewhere between what the employer pays and what the employee gets is not very transparent. I fail to grasp what is the point of splitting the AHV contribution. You might as well split the VAT. The end effect stays the same.

I say: if you need to tax labor, then at least abandon all the complicated contributions and finance them from the income tax. Then your employer pays you your salary of e.g. 10’000 CHF in full and you know that this is how much you cost him. You pay income tax and the government uses this money to maintain all the insurances and other labor-related programs.

Many people on this board don’t face this difficulty but a good chunk of employees in Switzerland have little bargaining power when it comes to salary. Getting taxes mandatorily paid half by the employer prevents the employee to end up with the same salary but double the taxes. By making it mandatory, it takes the weight away from the employee to negociate for it (think restaurant workers, cashiers, construction workers and the likes).

Besides, employers benefit from skilled workers partially because of tax money. Our educational/training system is renown, but it bears a cost. Likewise, things like unemployment insurance give more flexibility to employers too, and having employees not worry about not getting paid while they’re sick/injured has advantages too.

You’d be amazed by what many people abide by. I’ve been told countless times to put money aside for taxes, like that was some kind of trap in which many people fall (because, when you start working, you get taxed on the previous year so it takes almost two years for some significant amount of taxes to come in, and at that time, you also have to pay the slices of your current taxes, so you’re basically paying two years of taxes over a single year. Not really a problem if you have planned for it but a big hassle if you have spent your entire salary the first year thinking “wouhou! Now I finally have money!”).

I know of several people (one of them an accountant) who still think of the 13th salary as a bonus (hey, it’s in your total compensation, dude! If anything, that’s delayed compensation, so a penalty, not a bonus) and that it is there for them to pay their taxes with…

We definitely could do with more and better financial education in school. No matter how obvious the traps look, average people still manage to fall into them (just look how many people sign up for a combined insurance/savings 3a policy even on these boards).

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Maybe just to point that out as it might not be obvious to everyone. The normal tax system is actually that you have to pay taxes and that is not deducted from your salary. Only if you’re a foreigner or in special job situations you are taxed at source, where part of your salary is directly withheld.
This system seems to work reasonably, there’s also ways where you don’t have to pay the whole tax in one go, but can split it accross a couple of payments.

I’m aware that there are quite a bit of deductions directly taken from the salary (AHV, IV, 2nd Pillar)

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