Swiss voters seen to reject corporate tax reforms
Initial estimates suggest 60% have rejected proposal in referendum
The future attractiveness of Switzerland’s corporate tax regime has been thrown into doubt after initial estimates suggested that Swiss voters had decisively rejected reforms aimed at bringing the country’s practices in line with international standards.
The government in Bern had hoped to secure approval for changes which would have kept corporate tax rates low but abolished special treatment given to many multinational companies.
In a referendum on Sunday, however, the plan was rejected by 60 per cent of voters, according to estimates by the SRF, the public broadcaster — a much larger margin of defeat than opinion polls had suggested.
Bern and the Swiss cantons now face a scramble to rethink the proposals in the face of threats that important trading partners could take retaliatory action.
Ahead of Sunday’s vote, Switzerland was warned that failure to dismantle practices considered harmful by other countries could result in an international backlash. “Switzerland’s partners expect that it will implement its commitments in a reasonable timeframe,” Pascal Saint-Amans, head of tax at the Paris-based OECD, told the Financial Times.
The defeat is a blow for the business lobby in Switzerland, which argued that failure to agree on the reforms would create damaging uncertainty over their future tax bills. It suggests that the global anti-establishment mood has reached Switzerland, as the reforms had been backed overwhelmingly by the two chambers of the Swiss parliament as well as the government, with opposition largely from leftwing parties.
Since the second world war, multinationals and trading companies helped the small Alpine economy become one of the world’s most successful economies. Under the reform plans, the country’s 26 cantons would have continued to compete to offer companies the most favourable tax rates, but multinationals would have paid the same rates as other businesses.
To avoid imposing much larger bills on multinationals, the cantons announced plans to slash corporate tax rates for other companies, while the federal government in Bern said it would help fill shortfalls in tax revenues.
Switzerland embarked on the reforms following pressure from the EU as well as the OECD. Opponents led by the Swiss Social Democratic party argued, however, that the new system would have been too generous to business and led to large gaps in cantons’ budgets, which in turn would have hit public services.
Further alienating voters was a complex system of internationally acceptable tax reliefs which would have been available under the new system, for instance for research and development or income from patents and on shareholders’ equity. Critics argued the new regime would have simply boosted the income of tax advisers, lawyers and shareholders.
Opponents also argue the reforms could be modified relatively easily — a point disputed by supporters, who say the package took years of careful negotiation between the cantons and federal government.
They also clashed with supporters of the reforms over the economic impact of the reforms, with those in favour arguing that by securing Switzerland’s competitiveness, they would boost jobs and investment. Critics pointed out that multinationals liked Switzerland because of other factors — including its high quality transport infrastructure and skilled workforce.