Swiss Committee Rejects Banking Bonus Tax

by Ulrika Lomas, Tax-News.com, Brussels

07 April 2010

The Swiss Committee for Economic Affairs and Taxation of the Council of States has voted to reject a proposal to levy a 50% windfall tax on banking bonuses paid in 2009.

Following a decision by France and the UK to introduce such a one-off tax, Switzerland’s Federal Council was tasked to present a proposal, put forward by Alain Berset, requiring all banks active in Switzerland to pay to the Confederation a 50% windfall tax on variable remunerations accorded in 2009 – either in the form of cash, shares or options – exceeding a threshold of CHF40,000 (EUR27,933).

Within the context of the financial crisis, Berset emphasized that banks such as UBS benefited from direct support from both the Confederation and the central bank. Consequently, Berset maintained that banks should therefore be required to contribute to the high – and as yet unknown – costs of the crisis, posing a significant risk to taxpayers, and that Switzerland should follow the UK and France in their decision.

On December 9, 2009, the British government announced its intention to temporarily impose a special 50% tax on banking bonuses in excess of GBP25,000 (EUR28,159). Hot on the heels of this announcement, France unveiled plans to follow suit and to levy a windfall tax on all variable payments exceeding EUR27,000. Designed to contribute to the costs of the financial crisis, this one off-tax will be levied on 2009 bonuses paid out in 2010.

Defending its decision, the Committee noted that the feasibility of the request was highly problematic, particularly given the retroactive implementation of such an exceptional measure. The Committee also emphasized that there is not currently a constitutional basis to enable the tax to be collected.

The Committee rejected the proposal by 6 votes to 3.

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