At the end of May, the Swiss postal service announced yet another reduction in the number of its offices, as part of a long-term effort to save 42 million Swiss francs (September 2023). However, there seems to be a simple way to save money: stop paying an annual dividend of 50 million to the Confederation. Aside from the postal service, the political demand that public utilities provide a public service while paying dividends to the Confederation is contradictory.
Dividend income
Several public utilities are in the form of share companies in the hands mainly (if not exclusively) of the Confederation, and as such pay dividends. The figure on the left below shows the dividends paid by the postal service since 2012, which for a long time amounted to 200 million a year, before being reduced to 50 million in 2020. Taking all companies together, including Ruagg (defense) and Swisscom (telecoms) among others, the amount received by the Confederation is more substantial (figure right). It has hovered around 800 million, before coming down again in 2020.
How should we think of these amounts?
It's true that dividends are not a major source of revenue for the Confederation (the income and value added taxes each bring in 40 times more), and the amount has fallen in recent years. However, asking companies to provide a public service, and at the same time to pay dividends, is a shaky arrangement.
Public service is – by definition – not profitable, which explains why the private sector does not provide the corresponding service. In this case, the deficit must be covered by taxation. If a company has to provide a public service without making a loss, it must also be active in another line of business that generates a profit. This cross-subsidization of the company's various activities is not transparent, and also raises the problem of distorted competition with private companies that provide a similar service but do not benefit from the implicit support of the Confederation. It should be noted that the responsibility for this situation lies with the political authorities, since the management bodies of the companies concerned must fulfill the mandate they have been given.
Not only do the Swiss authorities not want public service providers to operate at a loss, they are asking them to be a source of financing via dividends. This arrangement, which seems to be a Swiss peculiarity, is in fact a tax in disguise. In the final analysis, profits and dividends come from the price paid by customers.
In the case of the postal service, savings efforts are ultimately the price of this tax demanded by the Confederation. It's true that consumer habits are evolving, and that unpleasant adjustments are necessary, but we would expect the company to be able to face up to these challenges without having to also play the role of tax collector.
The Confederation's wealth
The Confederation's holdings in companies are not an insignificant amount. The figure below, based on Switzerland's financial accounts, shows the Confederation's financial assets and liabilities since 2000.
While the liabilities are well known, consisting essentially of bond debt (green bars), the fact that the assets represent a substantial amount, notably in the form of holdings in public service companies (red bars), is less so. In net terms, the Confederation is clearly less of a debtor than the debt suggests.
It could be argued that these figures are a bit of an «optical illusion»: asset holdings are not securities that the Confederation could sell, because it wants to retain a majority stake in these companies. Of course, but then we need to be consistent: public services should be provided directly by the Confederation, and non-public services should be left to the private sector. That would be clearer, including in terms of the taxes involved, which would no longer be labelled as dividends.