Stamp duty and value added tax explained with pastries 

When you buy your morning pastry at the bakery, you pay VAT on it. When you buy shares through your bank, you don’t pay VAT on them, but you do pay stamp duty. In a referendum on 13 February 2022, the Swiss people will vote on partially abolishing this stamp duty. So two products, but different forms of taxation – that’s the narrative the opponents are pushing. Is that unfair? Not at all! Is it illogical? Absolutely not! But why not? 
Article byJan Weissbrodt

Financial assets are like vouchers, pastries are their countervalue

A share is a financial asset. In other words, it embodies a real asset in a purely monetary form. It’s nothing more than a voucher entitling the holder to a share of the company in question. The monetary embodiment of your pastry, meanwhile, is the price you pay for it. Let’s assume you buy it with loyalty points, which are also effectively a form of voucher. Should you be required to pay VAT on the price of the voucher, you’d be taxed twice, since exchanging the voucher for your pastry is also subject to VAT. Buying the voucher is basically a type of currency exchange. The same is true of buying a share or any other financial instrument. We can see them as vouchers that ultimately correspond to real assets, the latter being subject to VAT. Stamp duty thus constitutes double taxation of these assets.

Financial assets are a form of investment, pastries a form of consumption

In addition, VAT is intended to tax consumption, i.e. the use of goods and services. The pastry is the result of the value chain. It is – literally – consumed and therefore subject to VAT. Financial assets are not consumed, however. On the contrary, they represent savings and investment capital for the production of goods and services. Capital is thus deferred consumption, a source of value creation. VAT is therefore a charge on consumers, whereas stamp duty is a charge on savers. If we accept that today’s savings capital is tomorrow’s consumption, we can see that stamp duty and VAT are simply two ways of taxing the same thing at different times.

Financial assets are VAT-exempt, financial services are not

This is why financial assets are exempt from both VAT and stamp duty virtually everywhere apart from Switzerland. This exemption has nothing to do with banks, which don’t even pay these taxes themselves: they simply charge them to savers and pass them on to the tax authorities. Unlike financial assets (such as shares), most financial services (such as investment advisory) are subject to standard VAT, i.e. they are taxed as consumable real assets in exactly the same way as pastries.

Avoiding double taxation is a political objective

However, there are also political motives for freeing financial assets from taxation. Taxing savings capital, for instance, weighs on the pension system. Pastries are eaten straight away, but people generally expect to be rewarded for deferred consumption (savings). Baking pastries (investment) also creates work and generates income, for example for the baker and his staff, whereas the act of eating them (consumption) does not.

Stamp duty on new issues has even less in common with VAT

The stamp duty on new issues, which will be put to the vote on 13 February 2022, has even less in common with VAT. It’s a charge on the initial creation of equity capital in addition to the transfer stamp tax, which applies to purchases and sales of financial instruments. Unlike VAT and the transfer stamp tax, the stamp duty on new issues doesn’t even require a purchase or sale at all. Equity capital can be created, for example, by simply converting profits within the company.

Consumption taxes are more sustainable than investment taxes

We’ve established that investment represents future consumption and that financial assets represent future purchase prices, which is reflected in the same asset being taxed twice (on its real and monetary values) through stamp duty and VAT. If we want to avoid this double taxation, the more sustainable solution is surely to forgo a few finished pastries (VAT) rather than the baker’s only oven (stamp duty). This nevertheless brings greater prosperity for all because the baker can now buy a better oven for the same amount of money, sell more pastries to more customers, and thus employ more staff. Overall, this also means higher revenues for the tax authorities, since abolishing investment taxes actually represents an investment for themselves.

This comparison shows that stamp duty is an idea that would never even have occurred to us in the context of pastries. It shows that pastries and financial assets are in fact very different things, not simply “products”; that financial assets are more like vouchers, and buying them is just a form of currency exchange; and that stamp duty and VAT are therefore simply two ways of taxing the same thing at different times. Above all, however, it shows that the stamp duty on new issues can’t be seen as a substitute for VAT. Enjoy your next pastry!


Jan Weissbrodt
Head of Tax
+41 58 330 63 02