The joint project organisation of the Confederation and cantons submitted an interim report in May 2013, recommending a tax and fiscal policy approach for the next corporate tax reforms. The consultation of the cantons and private sector based on it revealed general acceptance of this approach. Building on this, the project organisation examined a series of measures and recommended some of these for implementation. The Federal Council took due note of the report on this matter today and instructed the project organisation to conduct a further consultation with the cantons. Afterwards, a consultation draft is to be drawn up.
Tax policy components
Certain provisions in Switzerland's corporate tax system are no longer compatible with international standards. These provisions should be abolished in the interests of legal and planning certainty. In order to make Switzerland more attractive as a business location and from a tax point of view, the project organisation recommends a package of tax measures. These should be compatible with international standards and thus enjoy greater international acceptance. Several of these standards are currently being discussed and further developed in international bodies, especially in the OECD. The project organisation advocates that Switzerland be actively involved in shaping these developments and take them into account - as well as the progress made in the dialogue with the EU on business taxation - when designing the third series of corporate tax reforms.
From today's standpoint, the project organisation recommends introducing preferential taxation of royalties (a so-called "royalty box") for cantonal taxes. The restricted interest-adjusted profit tax model at federal and cantonal level will be further examined. Both of these instruments are used in various OECD member states and could allow Switzerland to remain competitive for particularly mobile corporate activities. Moreover, the project organisation recommends examining in detail the abolishment of the issue tax on capital and measures in terms of cantonal taxes on capital. Finally, the cantons should modify their profit tax rates where they consider this necessary to maintain their international competitiveness.
Fiscal policy components
Because the Confederation also benefits if the cantons lower their profit tax burden, it should use vertical equalization measures to ensure the financial consequences of the tax reforms are fairly distributed. Such federal equalization measures in favour of the cantons are to be structured in such a way that they do not distort tax competition between the cantons. The extent of the Confederation's vertical equalization measures depends on how the tax measures are actually designed: the tighter the new provisions and the greater the need for profit tax reductions, the bigger the volume will turn out to be. The Federal Council will have to decide on the scope and type of vertical equalization measures within the framework of the consultation draft.
The project organisation wishes to maintain the tried and tested system of national fiscal equalization. However, the system will need to be adjusted following the corporate tax reforms in order to reflect the new tax policy realities. The steering body recommends weighting all corporate profits according to their fiscal utilizability in resource potential calculations.
It is not yet possible to quantify the financial consequences of the third series of corporate tax reforms for the Confederation and the cantons. It is to be expected that the reforms will put government finances under considerable strain. At the federal level, the issue of counter-financing should be addressed with the consultation draft and form an integral part of the reforms. Depending on the extent of the strain, receipt-side measures are also to be taken into account.
International developments regarding corporate taxation
Corporate taxes are an important part of international competition among business locations. In the wake of the financial and debt crisis, the tax policy of many states is now oriented towards the generation of additional tax receipts. Multilateral organisations such as the Organisation for Economic Co-operation and Development (OECD) or the European Union (EU) and many individual states have stepped up their efforts to ensure fair tax competition. Switzerland supports these efforts. In particular, it campaigns for a truly level playing field, i.e. with the same rules for everyone.
Switzerland - EU tax dialogue
The European Union considers that certain cantonal corporate tax arrangements distort competition, as the profits of domestic and foreign companies are sometimes taxed differently. Switzerland is firmly committed to tax competition, but it is willing to hold talks with the EU on contentious issues regarding business taxation. Switzerland expects the EU and its member states to take no countermeasures against Switzerland.
Project organisation for the third series of corporate tax reforms of the Confederation and the cantons
In September 2012, the Confederation and the cantons appointed a joint project organisation with the objective of reforming the Swiss corporate tax system in the tense areas of competitiveness, financing of government expenditure and international acceptance. The steering body is responsible for the overall political control of the project. It is composed of four equal representations from the Confederation and the cantons, and is chaired by the Head of the FDF, Federal Councillor Eveline Widmer-Schlumpf. The other representatives of the Confederation are State Secretary Jacques de Watteville (State Secretariat for International Financial Matters), Serge Gaillard (Director of the Federal Finance Administration) and Adrian Hug (Director of the Federal Tax Administration). Representatives of the Conference of Cantonal Finance Directors are Peter Hegglin (Cantonal Councillor, Zug), Eva Herzog (Cantonal Councillor, Basel Stadt) and Maurice Tornay (Cantonal Councillor, Valais). The Conference of the Cantonal Governments (CCG) is represented by Roland Brogli (Cantonal Councillor Aargau).
Address for enquiries:
Tax policy: Fabian Baumer, Vice-Director, Head of Tax Policy, Federal Tax Administration FTA
tel. +41 31 325 31 67, firstname.lastname@example.org
Fiscal policy: Tobias Beljean, Vice-Director, Federal Finance Administration FFA
tel. +41 31 322 60 09, email@example.com
International matters: Mario Tuor, Head of Communications, State Secretariat for International Financial Matters SIF
tel. +41 31 322 46 16, firstname.lastname@example.org
The Federal Council Internet: http://www.admin.ch/br/index.html?lang=en
Federal Department of Finance Internet: http://www.efd.admin.ch