Swiss set to approve tax overhaul in ‘existential’ vote

General view shows the eastern Swiss Alps, Lake Zurich and the city of Zurich
A general view shows the eastern Swiss Alps, Lake Zurich and the city of Zurich, Switzerland January 29, 2019. REUTERS/Arnd Wiegmann

April 5, 2019

By John Revill

ZURICH (Reuters) – Nearly two-thirds of Swiss voters look set to approve a shake-up of the country’s corporate tax system, heading off what its finance minister called an existential threat to Switzerland’s role as a business hub.

Around 62 percent of respondents will vote yes in the tax reform and pension finance referendum, according to a Tamedia poll published on Friday, defusing a long-running row over favorable Swiss tax rates for multinational corporations.

The May 19 vote takes place under Switzerland’s system of direct democracy.

Acceptance is vital to prevent the country being branded a low-tax pariah, Finance Minister Ueli Maurer said.

“For Switzerland’s position as an business location, the tax proposal is existential. If we say ‘no’ for a second time we can’t correct that again,” he told newspaper Neue Zuercher Zeitung in an interview published on Friday.

Two years ago voters rejected an attempt to overhaul the tax system, which critics say gives the country an unfair advantage in attracting global companies.

Under pressure from the European Union and the Organisation for Economic Cooperation and Development, the Swiss had promised to meet international standards and eliminate special low tax rates that benefit around 24,000 foreign companies based in Switzerland.

The government plans to scrap special tax status for these companies that pay corporate rates in individual cantons as low as 7.8 to 12 percent, compared with 12 to 24 percent for “normal” Swiss companies.

Cantons in turn will lower their tax rates for normal companies to deter them from leaving.

To cover the resulting revenue shortfall of around 2 billion Swiss francs ($2 billion), the federal government will increase the share of federal tax that cantons get.

To allay fears that corporations would benefit at the expense of citizens, the package increases annual contributions to the state pension system by 2 billion francs by raising contributions from employers and workers and having the federal government chip in more.

Maurer said a rejection by voters could land Switzerland on the EU’s blacklist of tax havens, with countries potentially starting double taxation of Swiss-based companies.

“A country that twice rejects necessary tax reforms loses trust,” Maurer said.

“It would simply mean that Switzerland is not a country of the future,” he said. “Of course we could do a repair job and come up with another plan, but that wouldn’t help much.”

(Reporting by John Revill; editing by David Evans)

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