Switzerland needs tax and pension reforms ‘to remain attractive’
The corporate tax and pension reform, on which Swiss voters will have their say on May 19, is necessary to remove the current “poisonous” legal uncertainty and ensure Switzerland’s leading position as a research, tax and business location, says Petra Gössi, president of the centre-right Radical-Liberal Party.
Switzerland is an attractive business location, which is partially due to its low corporate tax rate. However, some of the taxation rules are outdated and are no longer in line with international standards.
In an effort to prevent Switzerland from ending up on a black list and being sanctioned, the tax reform foresees abolishing certain preferential tax regimes and replacing them with a new set of internationally accepted and future-oriented measures.
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If adopted on May 19, the reform will secure more than 150,000 jobs as well as Switzerland’s leading position as a research, tax and business location. The Radical Party supports the tax reform and says ‘yes’ to a brighter future for Switzerland.
Switzerland does not want to easily hand over its top position as an innovative and attractive business location to other countries. International companies that pay billions in tax revenues, create tens of thousands of jobs and place numerous orders with Swiss small and medium-sized companies (SMEs) should be keen to keep their businesses in Switzerland in the future.
Out of 330,000 companies, 24,000 currently benefit from privileged taxation. Between 2011 and 2013, the total tax bill of these companies ran to more than CHF4 billion ($3.93 billion), which accounts for half of the Swiss government’s profit tax revenues.
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During the same period, cantons and communities received a total of around CHF2.2 billion in taxes from these companies a year. They also employ some 150,000 people who pay a significant amount of taxes and social security contributions.
In order to avoid an exodus of these companies as well as losing these contributions and jobs, the old tax regime, if abolished, would be replaced by a new one with future-oriented and internationally accepted tax concessions.
Patent box
Such a move would affect the cantons in many different ways; that’s why there is no universal central solution.
This is also the reason why the reform would have very little effect on government taxes. Instead, the reform gives the cantons the freedom to tailor their legislation and choose what internationally accepted measures they want to introduce.
With a so-called patent box, cantons can tax some of the profits from patents at a lower level as long as the research leading to the patent was conducted in Switzerland. Research companies which offer forward-looking and research-driven jobs would benefit from this patent box.
The reform would also ease the tax burden for research and development (R&D) expenses. This, however, only applies to expenses paid within the R&D sector plus a mark-up of up to 35% on these expenses for other R&D expenses.
Furthermore, cantons can grant solidly financed companies a deduction for self-financing, which would serve as a reward for reinvesting their own money, rather than incurring debt.
Legal certainty
Even though the total tax bill for multinational companies would actually be higher under the new law, they would get increased legal certainty in return.
The new law would ease their overall tax burden for SMEs, which is mainly due to the planned profit tax reduction in the cantons. Everyone would get an equal share of benefits. This would allow Switzerland to preserve its attractiveness as a research, taxation and business location where jobs and tax revenues are guaranteed.
Overhauling the system is critical for Switzerland to keep its attractiveness as a business location. The prevailing legal uncertainty is poisonous for Switzerland’s good reputation and has led to a backlog in investment. This uncertainty has to be eliminated for companies to invest again in Switzerland, create jobs and contribute significantly to financing our state.
For this reason, the Radical Party clearly supports the corporate tax reform and says “yes” to a Switzerland with a future.
The views expressed in this article are solely those of the author, and do not necessarily reflect the views of swissinfo.ch.
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Tax reform will ‘hurt middle class and slash public revenue’
(Translated from German by Billi Bierling)
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