Added value compensation law - a trouser slip under time pressure
The government and parliament are under considerable time pressure if the Value Added Compensation Act is also to come into force on time in the canton of Zurich.
With the revision of the Spatial Planning Act (RPG), the introduction of a value-added tax on zoning was also decided throughout Switzerland. The cantons are now required to enact the corresponding legislation to implement the national minimum requirement. There is still time until the end of April 2019.
In the canton of Zurich, a lot of time has been taken to prepare a draft. After the RPG had already entered into force in May 2014, it took almost four years in the canton before the law was referred to parliament for consultation. Given that the consultation process was very controversial, this is not surprising. The demands ranged from the minimal implementation of only the federal requirements to massive skimming off of the budget. The result is a somewhat half-hearted bill that provides for a rather modest levy for both new zoning and re-zoning. The situation is made more difficult by a popular initiative calling for a "community-acceptable" Value Added Equalization Act (MAG). The majority of left-wing circles are taking up the demands of the municipalities and cities, thus creating a strange constellation.
But where are the points of contention? The first point is the amount of the levy. Against the backdrop of the popular initiative, a compromise is to be sought here which, on the one hand, is not prohibitively high for investors and private individuals, but on the other hand meets the justified concerns of the municipalities. An upper limit of 40% for zoning in and zoning up could be a compromise. The second point is the approval of urban development contracts. This instrument should be available from the point of view of both investors and municipalities. In many cases, this will make it possible to find solutions that bring added value for both sides. However, in order not to allow the contract to degenerate into an instrument for enforcing excessive claims, the levy rate must not be too high. The investor should therefore be able to choose between the contract and a limited compensation. Otherwise, the temptation to use the urban development contract as a means of exerting pressure beyond the pain threshold of investors could be too great.
Thirdly and finally, it will be a question of how the skimmed-off funds are to be used. A cantonal fund for compensation in the event of zoning out would probably not need to be tapped very often in the canton of Zurich. The canton was and still is very restrictive when it comes to approving zoning. The reserves of building land are correspondingly small and will therefore be the funds required for zoning out. The funds should therefore end up where they are actually needed: in the municipalities and cities. After all, they have to provide most of the infrastructure. And because the levy can be credited as extraction costs for property gains tax, the use of funds should not be restricted too much. Otherwise a new front threatens to open up against the MAG.
Apart from all these rather technical issues, there is also a strategic issue that must not be ignored. The Confederation and the canton have clear ideas on how growth in Switzerland should be implemented in structural terms. The magic word is: internal consolidation. Ultimately, however, it is the voters and the parliaments of the municipalities and cities that decide on the building and zoning regulations. In many places, there is still considerable potential for internal densification based on the valid order. However, once this potential has been exhausted, it is precisely these voters and parliaments who will decide on measures for consolidation. And they will not agree to zoning in or out without receiving a real counter value. This fact, in turn, argues in favour of skimming off more than the absolute minimum and leaving the money where it is possible to create an equivalent value for the voters.
It therefore seems urgently necessary for the prudent forces to pull themselves together on this issue and forge a compromise. It is less crucial whether the federal government's deadline can be met. Much more important is a value-added compensation law that also takes into account the various interests in a reasonably balanced way and also finds a majority in a vote.
In the canton of Zurich, a lot of time has been taken to prepare a draft. After the RPG had already entered into force in May 2014, it took almost four years in the canton before the law was referred to parliament for consultation. Given that the consultation process was very controversial, this is not surprising. The demands ranged from the minimal implementation of only the federal requirements to massive skimming off of the budget. The result is a somewhat half-hearted bill that provides for a rather modest levy for both new zoning and re-zoning. The situation is made more difficult by a popular initiative calling for a "community-acceptable" Value Added Equalization Act (MAG). The majority of left-wing circles are taking up the demands of the municipalities and cities, thus creating a strange constellation.
But where are the points of contention? The first point is the amount of the levy. Against the backdrop of the popular initiative, a compromise is to be sought here which, on the one hand, is not prohibitively high for investors and private individuals, but on the other hand meets the justified concerns of the municipalities. An upper limit of 40% for zoning in and zoning up could be a compromise. The second point is the approval of urban development contracts. This instrument should be available from the point of view of both investors and municipalities. In many cases, this will make it possible to find solutions that bring added value for both sides. However, in order not to allow the contract to degenerate into an instrument for enforcing excessive claims, the levy rate must not be too high. The investor should therefore be able to choose between the contract and a limited compensation. Otherwise, the temptation to use the urban development contract as a means of exerting pressure beyond the pain threshold of investors could be too great.
Thirdly and finally, it will be a question of how the skimmed-off funds are to be used. A cantonal fund for compensation in the event of zoning out would probably not need to be tapped very often in the canton of Zurich. The canton was and still is very restrictive when it comes to approving zoning. The reserves of building land are correspondingly small and will therefore be the funds required for zoning out. The funds should therefore end up where they are actually needed: in the municipalities and cities. After all, they have to provide most of the infrastructure. And because the levy can be credited as extraction costs for property gains tax, the use of funds should not be restricted too much. Otherwise a new front threatens to open up against the MAG.
Apart from all these rather technical issues, there is also a strategic issue that must not be ignored. The Confederation and the canton have clear ideas on how growth in Switzerland should be implemented in structural terms. The magic word is: internal consolidation. Ultimately, however, it is the voters and the parliaments of the municipalities and cities that decide on the building and zoning regulations. In many places, there is still considerable potential for internal densification based on the valid order. However, once this potential has been exhausted, it is precisely these voters and parliaments who will decide on measures for consolidation. And they will not agree to zoning in or out without receiving a real counter value. This fact, in turn, argues in favour of skimming off more than the absolute minimum and leaving the money where it is possible to create an equivalent value for the voters.
It therefore seems urgently necessary for the prudent forces to pull themselves together on this issue and forge a compromise. It is less crucial whether the federal government's deadline can be met. Much more important is a value-added compensation law that also takes into account the various interests in a reasonably balanced way and also finds a majority in a vote.
Published on 05. October 2018 by Martin Arnold
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