The Daily Update - Swiss tax vote

Over the weekend the Swiss public rejected plans to overhaul their corporate tax structure, in the process giving the Swiss government a renewed headache on how to abolish ultra-low tax rates for multinational companies without causing a huge exodus. The government has already stated its commitment to abolish the preferential tax rates that cantons give to multinational companies; which have been set up as holding and domiciliary companies as they fall foul of OECD tax rules. Companies with this status account for over half of all the research and development spending in Switzerland as well as employing over 150,000 people. This equates to approximately half of all the corporate tax revenue the Swiss government receives.

Before the vote the polls indicated that the outcome was too close to call, however in the end over 59% of the voters were against the plans. The Swiss finance minister Ueli Maurer believes that companies might reduce investment or even leave Switzerland completely as a result of the vote. The government has until 2019 to try to find a solution to the problem and again put it to the people. For years the Swiss have been accused by both the EU and the OECD for the special tax statutes given to multinational companies; making it as some say a huge tax haven.

Over 24,000 companies have enjoyed these attractive tax rates in Switzerland. In 2014 the Swiss government agreed with the OECD to remove the special statute for these companies by 2019. After the rejection the original deadline will still remain.

The main argument for rejecting the proposed changes came from the second-biggest party in parliament, the Social Democrats, as well as unions, the Greens and even church leaders. They all feared that the public would have to bear the brunt of any reduction in corporate tax revenue through cuts in public spending and higher personal taxes. ‘The conservative parties wanted to push through tax reform with arrogance and haughtiness against the interests of the people. The Greens demand a new proposal with a sense of proportion’, a Green’s spokesman argued.

Time is of the essence for the Swiss government, however as Ueli Maurer put it ‘It will not be possible to find a solution overnight’ believing it could take up to a year to instigate a new plan, and even then, years more to implement it.