Negative interest rates have had a new and unusual effect on taxing bodies in Switzerland: Swiss Canton Tells Taxpayers to Delay Settling Bills.
Taxpayers in parts of Switzerland this year face an unusual request from fiscal authorities: please delay settling your bill until as late as possible.Unintended Consequences
Zug, the small but affluent canton outside Zürich, has announced it is ending discounts for early payment of tax bills. The reason? The longer it has cash on its books, the more likely it will incur costs as a result of negative interest rates charged by Swiss banks. The canton calculates that the move will save SFr2.5m ($2.5m) a year.
Its extraordinary appeal — which could be followed by other cantons — is the latest unintended consequence of extraordinary steps taken by the Swiss central bank to weaken the strong franc, which is hitting export industries in the affluent Alpine economy.
“Considering the long lasting phase of low interest rates in Switzerland and the negative interest rates which have to be paid, the canton has no incentive to motivate taxpayers to make early payments,” Zug authorities said in a statement. “On the contrary, the canton has an interest in receiving money as late as possible — so it pays less negative interest.”
I will gladly receive on Tuesday what you may wish to pay today.
Is a fine for bill prepayment the next logical step?
Think about that for a second.
Rather than getting individuals and corporations to spend (the desired central bank action), negative interest rates (not yet tried at the consumer level) just might get everyone to pay their bills early.
Going one step further, if lending rates are low enough, people could borrow money at negative rates and park it under their mattress or in safe deposit boxes and make money by borrowing.
Please take the money! Just promise to pay me back whenever.
More realistically, negative interest rates on consumer deposits will cause a run on the banks.
Mike "Mish" Shedlock