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OECD Urges Switzerland To Reform Dividend Taxation,
by Ulrika Lomas, Tax-News.com, Brussels
Monday, November 12, 2007
While Switzerland's corporate taxes are low in comparison to most of its international
competitors, the OECD has recommended that the government reinforce entrepreneurial
activity by easing the country's relatively high burden of dividend taxation.
In its latest economic review of the Swiss economy, the OECD concluded that
heavy taxation of dividends generates incentives for tax evasion through the creation of
complicated corporate structures, and might distort financing decisions of firms
that cannot raise equity on international capital markets. In addition, the
tax-induced incentives to retain earnings are further increased by the absence
of a capital gains tax, the OECD observed.
While the government intends to lower dividend taxation, it plans to limit
tax relief to owners of stakes exceeding 10% to limit revenue losses, which
according to the OECD could create incentives for some companies not to raise
equity capital from new shareholders, so that existing shareholders keep their
shares above the 10% threshold.
"Reductions in the taxation of dividends should not be subject to ownership
limits. The added cost of extending reduced dividend taxation to portfolio investments
could be funded by introducing a moderate capital gains tax," the report
suggested.
Moreover, the existence of stamp duties on the issuance of equity stock also
raises the cost of firm creation and growth without bringing in significant revenue
and should be abolished, the OECD argued.
Further information on the OECD's Economic Survey of Switzerland can be found
in the Tax News Resources
section.
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