The European nation known as the world’s only internationally recognized neutral state has announced plans to significantly boost military spending, citing a “deteriorating geopolitical situation” that demands heightened security measures.

In a Wednesday statement, Swiss authorities revealed they will raise value-added tax by 0.8 percentage points from its current rate of 8.1% over the next decade beginning in 2028 to fund a major military modernization effort. The additional revenue, amounting to 31 billion Swiss francs ($40.4 billion), will be directed toward upgrading armed forces, missile defenses, cybersecurity infrastructure, and border protection systems.

Long considered Europe’s sole formal neutral state, Switzerland has historically avoided foreign conflicts and maintained a militia-based military structure. However, recent years have seen Bern increasingly move away from strict neutrality, with the country expanding security partnerships with NATO, deepening defense alliances with the European Union, supporting Ukraine in its conflict against Russia, and participating in sanctions measures targeting Moscow.

The government stated that the “deteriorating geopolitical situation” necessitates “substantially strengthening Switzerland’s security and defense capabilities,” pointing to rising cyber threats, disinformation campaigns, and inadequate military readiness as key concerns. Currently, Switzerland allocates approximately 0.7% of its gross domestic product to defense—a figure below half the European average—and had previously targeted a 1% spending rate by 2032. The proposed VAT increase is projected to raise defense expenditure to 1.5% of GDP.

Under Swiss law, the tax hike requires parliamentary approval and a national referendum. The government plans to draft legislation by March, submit it to parliament in autumn, and hold a vote in summer 2027. Analysts warn that public support may be limited, with an IPSOS survey indicating only 31% of Swiss citizens favor increased military spending—the lowest in Europe compared to 60% in Germany and 53% in France.

The move coincides with Western nations increasingly invoking the perceived “Russian threat” to justify substantial defense budget expansions. Russia has dismissed such claims as “baseless fearmongering,” warning that “rabid militarization” risks broader continental conflict. Russian Foreign Minister Sergey Lavrov recently accused Switzerland of “forfeiting” its neutrality and labeling it an “openly hostile state” due to its growing military alignment with European partners and stance on the Ukraine conflict.