Swiss Voters Approve Corporate-Tax Overhaul -- Update
By Brian Blackstone
ZURICH -- Swiss voters approved a government plan to eliminate certain tax breaks for multinational companies, a measure aimed at bringing the country in line with international norms while maintaining its status as a low-tax center.
The measure passed by a margin of 66% to 34% on Sunday, according to provisional figures from the government.
Switzerland had come under pressure from the European Union and other international institutions to reform its system and eliminate the special deals that individual Swiss states, known as Cantons, have been able to strike with multinational corporations. In return, the plan adds globally accepted incentives, including sweeteners for research and development and income generated by patents.
A significant share of Swiss corporate taxes is instituted at the cantonal level, leading to competition within Switzerland to attract businesses. Now that the reform has been approved, the canton of Zug outside of Zurich, which is home to many cryptocurrency and blockchain startups, remains the most competitive canton, according to an analysis by UBS Group AG published Sunday, followed by Basel, where Novartis AG and Roche Holding AG are based.
When cantonal and federal corporate taxes are combined, Switzerland has an overall average rate of 21.15%, according to the Organization for Economic Cooperation and Development, compared with 26% in the U.S. and 30% in Germany.
Swiss business groups had backed the government plan. "Switzerland must ensure that its tax system continues to enhance its attractiveness as an economic center," the Swiss Insurance Association said Sunday after the vote. The law "protects the Swiss economy from retaliation by foreign countries."
Voters two years ago rejected a plan over concerns that it was too generous to corporations at the expense of individual taxpayers. The broad outlines haven't changed much, although the government eliminated certain tax breaks that were criticized in the last plan. Critically, it adds about 2 billion Swiss francs in spending to shore up the country's pension system. That extra pension money spending was seen as a way to boost public support for the tax reform measure.
"For the Federal Council and Parliament, reforming corporate taxation while at the same time financially strengthening the [pension system] is a balanced compromise from which the entire population will benefit," the finance ministry said in February.
Switzerland isn't in the EU, but it agreed with the EU in 2014 to abolish the special arrangements that taxed foreign and domestic revenue differently. If nothing was done, Swiss-based companies would have faced the prospect of retaliation from tax authorities in other countries where they do business.
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(END) Dow Jones Newswires
May 19, 2019 13:55 ET (17:55 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.