Swiss plan to reform corporate tax system stymied

A referendum in Switzerland has rejected planned reforms of the country's corporate tax system, despite support from government and business for the new regime, which was intended to bring the current approach of low taxes for multinationals into line with international norms

The vote on Sunday saw 59% opposed the proposals, which were designed to soften the impact of a sharp rise in corporation tax for multinationals with a range of other new tax breaks.

The aim of Switzerland’s corporate tax reform III package was to provide legal certainty and security of investment while also increasing the general competitiveness of the tax system and abolishing special tax regimes.

The tax reform measures included introducing a patent box regime at the cantonal level, to encourage companies to relocate development-related, high-value jobs to Switzerland. Cantons would also have the option to introduce increased deductions for research and development expenditure.

Cantons would be able to reduce their cantonal and communal corporate income tax rates, and there were a number of other planned measures relating to relief on capital tax levied on participations, patents as well as similar rights, and intra-group loans. 

The plans were intended to address concerns expressed by the OECD, among others, that Switzerland gave multinationals special tax treatment. Some pay virtually no tax above an effective federal tax of 7.8% because of deals agreed with cantons.

However, they were opposed by Social Democrats, Greens, trade unions and churches who argued that the reduced tax revenue would still lead to cuts in public services or higher personal taxes.

Following the referendum result Ueli Maurer, Switzerland's finance minister, said it could take a year to come up with a new plan, and that Switzerland risked losing foreign investment as a result, and there was a risk that individual countries would start double taxation of Swiss-based companies.

Switzerland told the OECD in 2014 that it would abolish the special status by 2019, which has been used by around 24,000 multinationals looking to lower their tax bills.

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