Facts
The case concerns the question of whether the mandate tax, which a holder of a political office pays to their political party, can be deducted as income-generating costs within the meaning of Art. 22 para. 1 lit. a of the Federal Council Decree on Direct Federal Tax (BdBSt).
The taxpayer X. declared income from his mandates as a cantonal councillor, municipal president, and member of the board of directors in his tax return for direct federal tax 1991/92 and deducted amounts for mandate taxes he had paid to party Y. The tax administration of the canton of Basel-Landschaft did not recognize these deductions. X. filed a complaint, which was upheld by the Cantonal Tax Appeal Commission. The Federal Tax Administration then filed an administrative court appeal with the Federal Supreme Court.
Considerations
The Federal Supreme Court states that income-generating costs within the meaning of Art. 22 para. 1 lit. a BdBSt are expenses that are directly incurred to generate the income and are directly causally related to it. The concept of necessity is to be interpreted broadly.
However, in the case of employed persons like the taxpayer X., only those costs that are objectively necessary to generate the relevant income can be deducted. In the view of the Federal Supreme Court, the mandate tax has a mixed character and cannot be easily distinguished from voluntary contributions to a political party, which are not deductible. Furthermore, an unrestricted deductibility of the mandate tax could lead to…