Swiss Export Industry Under Pressure: Italy's Tax Credits Threaten Billion-Franc Orders

Executive Summary

The Swiss export economy is losing market share due to Italian tax credits that exclusively favor EU and EEA states. Orders worth one billion francs are at stake, as Italian customers receive nothing when purchasing machinery from Switzerland. Swissmem, the association of the machine, electrical and metal industries, sees this as outright discrimination, effective from February 2026. In parallel, the Federal Council is debating a value-added tax increase to finance national defense and old-age pensions (AHV). The War Materials Act is also being revised to keep the defense industry competitive.

People

• Stefan Brubacher

Topics

• Trade discrimination by Italy
• Swiss export economy
• Defense policy and War Materials Act
• Federal budget and value-added tax
• Economic security

Clarus Lead

Italy is introducing a tax credit law that favors machinery purchases from the EU and the EEA – effectively excluding Switzerland. This does not only affect individual firms, but threatens a central export sector: high-quality machinery and electrical engineering from northern Italy and Switzerland together form one of the world's leading production centers. Swissmem Director Stefan Brubacher warns of a shift in production facilities to Germany and the loss of Swiss jobs. In parallel, debates over value-added tax and defense policy reveal deeper questions: How can Switzerland preserve its economic and security independence?

Clarus Original Research

• Clarus Research: Swissmem quantifies the direct damage at 1 billion francs. The tax advantage for EU/EEA purchases is so severe that production relocations from Switzerland to Germany are already taking place. This refutes the assumption that Swiss quality alone can compensate for discrimination.

• Analysis: Italy's law is no accident but a pattern: globally, protectionist laws are increasing. Switzerland is regularly overlooked because it is not in the EEA. Without the planned Bilateral III agreements, institutional protection is lacking.

• Consequence: Decision-makers must see the defense industry debates as an opportunity: only with robust own defense capability and broader industrial capacities can Switzerland survive in the turbulent geopolitical environment. At the same time, the federal government must lobby more aggressively bilaterally and in Europe – Swiss interests must not be overlooked.

Detailed Summary

The Italy Problem: Discrimination by Omission

Italy's new tax credit law (in force as of February 1, 2026) grants companies massive tax refunds for machinery purchases from the EU and the EEA. Switzerland, which is not part of the EEA, is excluded. Brubacher suggests that this is partly carelessness: the Italian side did not realize that Switzerland is outside the EEA. Nevertheless, the result is clear: Italian customers have no economic reason to buy from Swiss manufacturers when they can receive substantial tax credits for purchases from German or Austrian machines.

The damage is considerable. Swissmem calculates one billion francs in endangered orders – not as a worst-case scenario, but as a realistic assessment. The tax disadvantage is so massive that parent companies with production sites in both Switzerland and Germany are already considering reducing Swiss capacity. This destroys not only orders, but jobs and expertise.

Why the Response Came Too Late

Brubacher defends the response speed: Swissmem reacted within a few weeks, together with SECO, the embassy in Rome, and personal contacts. A consultation phase until late January allowed for comments. Nevertheless: the hope that Italy could still adapt the implementing regulation remains unfulfilled so far.

This highlights a structural problem: Swiss associations and embassies must be even more vigilant. While the EU naturally writes its own laws from the perspective of "EU and EEA," it regularly overlooks Switzerland. Brubacher therefore calls for increased presence of Swiss interests at the European level – he himself sits on the board of European industry associations and wants to explicitly advocate for Swiss interests there.

Bilateral III as Anchor of Hope

Brubacher points to the Memorandum of Understanding between EU Trade Commissioner Sefcovic and Federal Councilor Karin Keller-Sütter (Foreign Minister): both promise each other to advance Bilateral III with the Swiss people and in the EU. Italy's discrimination contradicts the "spirit" of these planned agreements. With closer bilateral relations, Switzerland would have more "leverage" – more opportunities to convince partners to treat Swiss exporters equally to EEA states.

However: tax law does not fall under Bilateral III. A point that opponents of the Bilateral are already using: if the EU does not even stick to existing treaties, why should Switzerland enter into closer treaties? Brubacher counters that this argument is logically flawed – Bilateral III gives Switzerland more influence to prevent such problems from occurring in the first place.

Value-Added Tax and National Defense: An Unexpected Alliance

In a second focus area, Brubacher discusses the value-added tax increase of 0.8 percentage points, which the Federal Council proposes to finance security and AHV-13. Most parties are skeptical – only the Center Party (Defense Minister Karin Keller-Sütter) explicitly supports it. Swissmem surprises: they support this tax increase.

This is tactically interesting. Swissmem traditionally stands for tax cuts and rejected the health insurance premium relief initiative a year and a half ago – arguing that value-added tax was the wrong financing instrument. Why the change of mind?

Brubacher explains pragmatically: savings alone does not work. The 2027 Relief Program finds no majority for deep savings measures. The debt brake must not be touched. For national defense and AHV (4–5 billion euros additionally needed), savings are insufficient. Value-added tax affects everyone, and is therefore fair. Swissmem would even go further: support the Council of States proposal of dedicating value-added tax cents to both defense and AHV – this creates transparency and justification.

Brubacher emphasizes: good framework conditions – debt brake, central bank independence, security – are necessary for companies and jobs. Without these, everything else fails.

Defense Industry and War Materials Act: The Uncomfortable Compromise

A third topic is the revision of the War Materials Act. Opponents (such as SP collector Lisa Link) warn that Switzerland profits from wars. Brubacher disagrees: it is not about profit, but about national security and an independent industrial base.

The defense industry is numerically small but strategically critical. Countries like Denmark and Germany no longer buy Swiss defense equipment because they are uncertain whether Switzerland will deliver in an emergency. Result: these companies build production facilities abroad – and thereby lose a high-tech capacity that is indispensable for Switzerland. The COVID example demonstrates it: initially there were shortages of protective masks, but after four weeks the EU recognized: ventilators from Switzerland are essential.

The revised law text is intended to permit exports under clear conditions:

• No deliveries to countries with serious human rights violations
• No weapons against civilian populations
• No re-export license required for NATO and EU partners

This is a compromise: Switzerland remains not absolute, but becomes functional again. Countries like Saudi Arabia are effectively excluded; NATO partners can pass on without veto. This also reassures countries like Germany, which had complained that Swiss veto power gave them too little planning security.

Key Takeaways

• Italian tax credits discriminate against Swiss machine builders by approximately 1 billion francs in orders; production relocations to Germany threaten.

• Switzerland is regularly overlooked in European regulations because it is not in the EEA – a structural problem that must be solved through enhanced diplomatic presence.

• Swissmem supports the value-added tax increase as a pragmatic way to finance security and AHV, as savings programs fail.

• Switzerland is losing high-tech defense capacity because foreign partners are uncertain whether they will be supplied in an emergency – a national security threat.

• The revision of the War Materials Act creates clarity for NATO partners and effectively excludes questionable regimes.

Stakeholders & Affected Parties

Opportunities & Risks

Relevance for Action

For the Federal Council

• Immediate Measures: Intensive bilateral talks with Italy to adjust the implementing regulation; consider escalation via EU Trade Commissioner.
• Structural: Swiss embassies must proactively scan EU draft laws; include Swissmem and other associations systematically earlier.
• Indicator: Italian adjustment by March 2026, or document damage volume for WTO proceedings (long-term).

For Swissmem and Exporters

• Defensive: Secure production sites in