Swiss Voters Reject Corporate Tax Reform In Referendum

On February 12, Swiss voters blocked the government’s attempts to reform its corporate tax regime by abolishing ultra-low tax rates for multinational companies. Almost 60 percent of voters refused the plans that political and business elite embraced under international pressure.

Background: Special Tax Status in Switzerland

The Organisation for Economic Cooperation and Development (OECD) and the European Union have been putting effort to eliminate unfair competition that benefits foreign businesses with special status in Switzerland. Special tax regimes have contributed Swiss economy making it attractive for foreign businesses, with almost 25,000 companies providing revenue of over CHF 5 billion to the federal government and cantons. The Government planned to cancel special status and introduce corporate tax rate with tax breaks on patents, research and development, and capital taxes.

Outcomes of Referendum

The Swiss parliament approved in 2016 to abolish the special arrangements, but faced a national vote after 50,000 signatures triggered a referendum that took place on Sunday, February 12. According to preliminary results released by the government, 59% of voters cast ballots against the reform plan, while 41% were in favor. The referendum results are binding, meaning the parliament must come up with a new tax reform plan.

Political Stance on the Issue

Switzerland’s second largest political party, the Social Democrats, were officially opposed to the measure, which they warned could result in 2.7bn SFr (£2.16bn) in lost revenue. Commenting on the vote, Switzerland’s Green Party stated: "The conservative parties wanted to push through tax reform with arrogance and haughtiness against the interests of the people."

The Government Needs An Alternative

Finance Minister Ueli Maurer said the government now needs time to analyze the situation. "It will not be possible to find a solution overnight," he said, adding it could take a year to come up with a new plan and years more to implement it. "It is extremely important that we find a solution within the coming two years," Heinz Karrer, head of Swiss business lobby Economiesuisse said.

Sources: Reuters, FT, Fox Business, City A.M.
 

 

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