Switzerland is patting itself on the back after finally getting off the European Union’s gray tax havenexternal link list. But the celebration may be short-lived.
The long-awaited corporate tax reforms signed and sealedexternal link earlier this year helped Switzerland get off the worst tax evasion offenders list and breathe a sigh of relief. But it faces a new challenge with momentum mounting to upend the way multinationals are taxed that could reveal the country’s true colours when it comes to what a “fair share” really means.
Last week, the OECD released their proposal to tax multinational companiesexternal link where they generate sales instead of where they are based. It was originally designed to make sure big tech companies pay their dues but is now a bigger effort to rein in multinationals for avoiding taxes where they do most of their business.
For a small market but big multinational hub like Switzerland, the proposal could have far-reaching consequencesexternal link writes NZZ. According to some estimates, Switzerland stands to lose up to CHF10 billionexternal link ($10.2 billion) under the reforms. To put this in perspective, Novartis generates just 2% of its sales in Switzerland, but more than one third of its income taxexternal link is paid to the local treasury.
But the winners and losers in such reforms are still unclear. Some say the changes would benefit big consumer markets like Indiaexternal link and Brazil. Others say it would disadvantage low-income countriesexternal link where goods are made.
What’s your take on all the tax reform? What does a fair share mean in the digital age? email@example.com
And in other news:
Geneva-based energy trader Gunvor will have to dig deep to pay for its bribery and corruption sins committed a decade ago in the Congo and Ivory Coast. The Swiss Attorney General ordered the company to pay around CHF90 millionexternal link citing “serious organizational deficiencies” that allowed employees and agents to bribe public officials in order to gain access to petroleum markets.
Will it be enough for the company to change its ways? CEO Torbjorn Tornqvist told the Financial Times that the company has learned its lesson and it is now willing to walk away from “good businessexternal link” if it is too risky. But the commodity trading business continues to play a game of catch up when it comes to legally and ethically acceptable business practicesexternal link.
The industry’s woes don’t end there with revelations that dogs have been involved in experimentsexternal link conducted on behalf of a Swiss biotech company in a laboratory in Germany where it is said to be “easier” to conduct such tests.
Credit Suisse agreed to safeguards for indigenous peoples following a mediation over the Dakota pipeline. Several banks have faced a public backlash for financing the pipelineexternal link set to run through traditional grounds of Sioux native Americans with fears this could pollute the local water supply. While some NGOs said the move was only a “first step”, it does send a signal that banks have at least some responsibility for human rights in the projects they finance.
There were more mixed messages about Switzerland as a great place to do business. The country dropped one spot in the latest WEF economic competitiveness rankingexternal link to fourth, surpassed by the Netherlands which has been wooing firms fleeing Brexitexternal link.
Our story on Geneva found that despite recent downsizing by Japan Tobacco International and some other big firms, multinationals are still setting up shop in Western Switzerland - but at a slower paceexternal link.
What’s coming up? I take a look at how the Swiss are responding to all the talk about 5G and cybersecurity risks of working with Huawei, which has a growing foothold in the 5G market in Switzerland.
Also, the Swiss “go to the polls” on Sunday to vote for a new parliament but the big story of the campaign has been less about the candidates and more about the money or rather, the lack of transparencyexternal link surrounding big company political donations.
Keep in touch.