Companies will no longer be able to claim tax rebates on criminal fines and bribe money under proposed changes to the Swiss law. But firms would still be allowed to claw back taxes paid on fraudulent profits that they are subsequently ordered to surrender.
The draft law, announced by cabinet on Wednesday, hopes to clarify the tax treatment of criminally convicted companies. The issue turned into a political and social hot potato when Swiss banks - starting with UBS in 2009 - faced huge fines for tax evasion and other offences.
Cabinet said as early as 2014 that it did not think fines should be tax deductible and sent the issue for consultation last year. Two months ago, the Federal Court also ruled against corporate tax rebates offsetting criminal penalties.
Parliament will now have the final say on the proposed amendment that also includes a clause to stop firms claiming tax deductions on bribes.
However, 22 cantons thought that tax rebates should continue if a company is ordered to disgorge profits earned from illegal activities. Cabinet said on Wednesday it would take this demand into consideration in its draft law.
In 2014, Credit Suisse was hit with a combined penalty of $2.8 billion (CHF2.8 billion) by the United States authorities for tax evasion offences. Using this as an example, the bank would be able to claim a tax rebate on $800 million under the proposed law change.