Switzerland announced on Wednesday that it will boost defence and security spending by an extra 31 billion Swiss Francs ($40.4 billion) starting in 2028, financing the increase with a decade-long hike in sales tax.

The Federal Council pointed to worsening geopolitical tensions as the reason for the move, noting that military expenditure in Switzerland is not set to reach 1% of GDP until 2032 under current plans.

“The world has become more volatile and insecure, and the international order based on international law is under strain,” the government stated.

The plan calls for the sales tax to rise by 0.8 percentage points for a decade, beginning in 2028, Reuters news agency reports.

Switzerland will shift its short-term procurement priorities to address the most likely threats, Defence Minister Martin Pfister said, highlighting the need to counter mini-drones, invest in IT, and strengthen cyber defences and electromagnetic surveillance.

“There are critical gaps in our capabilities,” Pfister said during a press conference, noting that the increased spending would also support police and border security, as well as enhance Switzerland’s capacity to address long-range threats and hybrid attacks.

Swiss officials and lawmakers have cautioned that global conflicts, such as Russia’s invasion of Ukraine, US-China tensions, and instability in the Middle East, are creating heightened risks for the country, including espionage, cyberattacks, and potential terrorist acts.

The government added that existing budget plans no longer account for rising arms costs, which have been pushed up by inflation and stronger demand.

The increased expenditures are expected to boost Switzerland’s defence spending to roughly 1.3-1.5% of GDP, according to Marc Siegenthaler, a senior official at the defence ministry.

The government noted that the plan must be approved by parliament and could face a referendum, potentially next year.

Furthermore, the government announced plans to revamp intelligence laws to strengthen its capacity to identify threats from terrorism, extremism, espionage, and cyberattacks.

The reform would broaden the Federal Intelligence Service’s mandate, allowing it to gather information from banks and other financial institutions to tackle serious threats like spying or terrorist financing.