Swiss voters set to reject corporate tax overhaul plan
Swiss voters have clearly rejected plans to overhaul the corporate tax system, in a setback for government efforts to abolish low tax rates for thousands of multinational firms while encouraging them to stay, projections by broadcaster SRF showed. Most Swiss recognize the country needs tax reform to avoid being blacklisted as a low-tax pariah. But new measures proposed to help companies offset the loss of their special status breaks had created deep divisions.
“It is so clear that you can already say the measure will fail,” political analyst Claude Longchamp of the gfs.bern research and polling institute told SRF around half an hour after polls closed. SRF said voters appeared to have rejected the tax plans by about 60 percent to 40 percent. Switzerland has been in the European Union’s firing line for years because cantons (states) have a special tax status for foreign companies that means some pay virtually no tax other than an effective federal tax of 7.8 percent.
The country agreed with Brussels in 2014 to abolish this status because it allowed some foreign firms to pay far lower tax on overseas earnings - an attractive perk for around 24,000 multinationals looking to lower their tax bills. To offset the introduction of higher tax rates the government also proposed giving companies tax breaks on research and development (R&D) in Switzerland, profits from patents developed there and deductions for excess company equity.
In addition, many cantons say they would also reduce corporate tax rates for all companies to reduce the fiscal burden and dissuade multinationals from leaving. After parliament approved the measures last year, critics gathered the 50,000 signatures needed to trigger Sunday’s referendum, which can overturn the parliamentary vote.
The No campaign was led by a coalition including the Social Democrats, Greens, trade unions and church leaders who feared the public would bear the brunt of reduced company tax revenue through cuts in public services or higher personal taxes. Those backing the government say the reforms struck a balance between abolishing the tax breaks criticized by Brussels and new measures that will keep Switzerland competitive.
The stakes are high for Switzerland, already coming to terms with the end its long-cherished tradition of banking secrecy. If multinationals pull out, the economy could suffer. The changes also come at a time US President Donald Trump is considering slashing corporate taxes and Britain has hinted it could cut its rates when it leaves the EU. —Reuters