Swiss vote on multinational tax perks in February referendum

ZURICH: US medical implant maker Zimmer Biomet ’ s decision on a potential US$ 40 mil lion investment in its Swiss factory has been put on hold until the outcome of a referendum next month on tax reform.

A long- standing tax break that has attracted thousands of companies to Switzerland is set to go and the issue for Zimmer and some 24,000 international firms is how the new regime will stack up against other low-tax jurisdictions.

That’s not immediately clear as Switzerland’s 26 regions, or cantons, set their business taxes. Consultants KPMG reckon the average Swiss corporate rate will be about 14 percent after the reform, above Ireland’s 12.5 per cent, but lower in some cantons.

Switzerland has been in the European Union’s firing line for years because cantons have a special tax status for foreign companies that means some pay virtually no tax over an effective federal tax of 7.8 per cent.

The country agreed with Brussels in 2014 to abolish this status as it al lows some foreign firms to pay far lower tax on overseas earnings, an attractive perk for multinationals looking to lower tax bills. — Reuters

The upswing in zero- based budgeting ( ZBB) signals that a broader cross- section of US companies anticipate turbulence in their revenue growth. They face more pressure on profits, too, as wages and interest rates increase, and a stronger dollar makes their products more expensive overseas.

In consumer staples, where sales growth is often capped in the low-tomid single digits, Campbell Soup Co, Kellogg Co, and Oreo cookie maker Mondelez International Ltd have already rolled out ZBB programs that promise billions of dollars in savings.

Other industries, including finance, energy and manufacturing, are now following suit. Use of ZBB in 2017 is expected to increase dramatically in the United States and around the globe, according to consulting experts. Bain & Company reported last year in a survey of 406 North American companies that 38 per cent of that group would use ZBB, up from just 10 per cent in 2014.

“ZBB has taken on a life of its own,” said Greg Portell, a partner at consulting firm A.T. Kearney.

A ZBB approach requires corporate managers to justify each line item of spending in their budgets, or even build their budgets from scratch. That is a departure from the typical process of using the previous year’s budget as a starting point and adjusting it based on revenue and inflation projections, for example.

It often cracks down on the size of a company’s real estate footprint, corporate travel, terms of international assignments, redundant technology and outside consultants. Employees get cut, too.

But there are risks. One is that companies focus too keenly on restraining spending and not on reinvestment that promotes new products and revenue growth. — Reuters