Swiss Reject Corporate Tax ReformsFeb 21, 2017
Switzerland’s efforts to revamp its corporate tax system have suffered a setback after voters conclusively rebuffed reforms to bring the country’s strategies on par with global expectations.
The government had intended to obtain approval for adjustments that would keep costs internationally competitive while abolishing preferential treatment for multinational corporations and their subsidiaries.
However, during last week’s referendum, the idea was turned down by almost 60% of voters.
The concern is that multinational corporations will opt out of Switzerland, or won’t relocate to the country because of the doubt incited by last week’s vote.
Switzerland is dealing with rising global tax competition - which may include the United Kingdom.
Since many decades, multinational corporations have assisted the small Alpine economy and turned it into one of the world’s most thriving economies. Under the reform plans, Switzerland’s 26 cantons would have regularly competed to provide multinational corporations with the most favorable tax rates, but these multinational corporations would have paid the same rates as other corporations.
To bypass imposing bigger bills on multinational corporations, the cantons announced ideas to reduce corporate tax rates for other businesses.
Alienating voters further was a complicated system of globally acceptable tax reliefs that would have been available under the new system. Critics argued they would have basically increased the revenue of shareholders and service providers.
The next step is uncertain. The cantons may still move forward with corporate tax adjustments that would balance them with global standards, but without any assistance from the federal government.
Reform supporters make a case that by securing Switzerland’s competitiveness, investments and jobs would be boosted. However, according to critics, multinational corporations incorporate subsidiaries in Switzerland because of its skilled workforce and high-quality transportation infrastructure.