Sure, you can call it a fictional income, but “living for free” in a paid-for house is an income on capital invested much like dividends.
And dividends are taxed as income.
It’s a justified tax on house-owners, and a progressive/fair one at that, i.e. those in villa’s pay more than those in a small apartment.
It’s only “crazy” because it’s not very common internationally. But maybe the others are “crazy” to selectively advantage homeowners?
And let’s see the whole picture - the Eigenmietwert is typically 20-40% below what the Marktmiete would be, and is typically re-evaluated only every 15 years (and we all know how much rent has gone up in 15 years) and can be squeezed lower by the home-owner with various “tricks”.
Also interest payments on the bank loan (commonly 66-80% of the property value) can in turn be subtracted in full.
Funny example but if I buy a cow and don’t have to buy milk anymore do I have to pay taxes on the milk that I get for “free” from the cow? You can even call it the “milk dividend” of my invested capital (cow).
Imputed rental value is also not stopping people from buying RE because as you mentioned it’s not really the market value that would be paid in rent and you can also deduct interest payments which further lowers the taxes.
The main focus point was: “The imputed rental value is intended to put property owners and tenants on an equal footing”. Which is wrong as one (property owner) bears much more risk than the renter so economically thinking this has to be rewarded somehow IMHO.
Hence I’m personally not a fan of “Eigenmietwert”.
It’s a Naturaleinkommen gained from something you invested in, so yes, it should be taxed. I’ve invested my money in stocks, receive dividends, pay tax on them, and then buy my milk. It would be unfair to only tax me, and not tax you. Of course your milk value is only taxed "after expenses (hay) and your work (shovelling cow sh*t ), so that it’d probably be “zero”.
Also it would be terribly complicated to tax all such Naturaleinkommen, and it’d be mainly small amounts compared to “normal incomes”. But the Eigenmietwert, it’s “easy” and a large chunk, relative to “normal” income levels, so that it can make sense to tax.
A previous comment called it “crazy”, could mean it is stopping or at least slowing down some people?
I don’t know who that focus point is quoted from, but would rather call it “the imputed rental value is intended to put property owners and stock investors on an equal (taxed) footing”.
My stocks bear risk too. Taxing me and not the home-owner-investor is / would be unfair.
I’m just saying because not so long ago we had some users on this forum who got offended really fast but I’m only out for discussion → all good!
So we agree on that one.
Just because it is easy is no justification for me to tax an income or capital gain. IMHO it should either be equal to all or nothing when logically thinking but I do understand that this is not practical and would create too much bureaucracy.
Well if your living alone then it does make a difference that is true.
I was thinking of the average house in my neighbourhood where the owner lives in the house and has one or more flats rented out so the rents more than cover all the costs so the imputed rental value is also in some way paid with the rents.
Yes that does make sense but is the intention really the same? I’m buying stocks to preserve and generate wealth but is this the same with a house or a flat? I think for most people it’s just a nice side effect if your house/flat gains in value but this is not the main reason for the purchase.
But farmers in switzerland in fact have to declare „Naturalbezüge“ and as matter of fact are paying income taxes on it.
There are standard amounts, around CHF 1000.- p.a. per adult person in the household.
And farmers cant withdrawal from this fictive income, even if they show all their groceries bills as proof for buying all the food in supermarkets, as other people do.
Exactly so why not copy this logic to homeowners? Most of the homeowners only have one home and maybe a really small amount also has a holiday flat somewhere.
If you start to scale this economically, as does the farmer with several cows, you are definitely signalling the intention to gain profits which is not the case if you are just owning the home for yourself and maybe rent out one or two flats (okay this might trigger signal to gain profits too).
Yes, you are right here. It’s more “emotional reasons” (sorry, no offense, don’t know how to call it, maybe not the right wording) for a lot if people. I was thinking there has been a lot of FOMO re house-buying in the last years, but it’s probably more people worrying that in future it will be more unaffordable, and less people hoping to increase wealth by prices going up.
I want to also add one additional benefit to society of the Eigenmietwert that was not mentioned yet. It discourages owning homes that are not lived in or rented out. Which is a real problem elsewhere on the planet, but not so much in Switzerland, so perhaps it is working!
Given their low retirement income, I’d be happy if my parents didn’t have to deal with that (imho) absurd fictional income.
Also encouraging people to reduce their debt sounds like a sane thing to do. Unfortunately, that won’t happen if deductible interests are maintained, which seems to be the case here. This probably makes the project too unbalanced. Leftists will raise their “gift to the richest” red flag, others will say that the government can’t afford the resulting tax losses.
From the last iteration of the project I think interest deductions are limited to 70% of the taxable yield of your wealth (i.e dividends, interests on savings). In my opinion taxing dividends at the same level as income does not work if you cannot deduct the cost of borrowing.
Anyway there are other costly changes in the pipeline, like individual taxation for married couples and increased deductions on childcare. Implementing all will result in billions of tax losses and I guess the property one has the lowest chance against lefties in the parliament or in a votation if it comes to this.
I have 14.5K Eigenmietwert for a house which right now would probably sell for around 1.3M and I guess could rent for at least 36K/year gross. Has not changed in 6 years since we bought, while the insured value of the building was increased this year.
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), so that it’d probably be “zero”.