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Economiesuisse Supports Corporate Tax Reform Thrust

by Ulrika Lomas,, Brussels

26 December 2013

Swiss business federation Economiesuisse has welcomed work undertaken by the Confederation and cantons on plans to reform corporation tax in Switzerland (Unternehmenssteuerreform III), underlining its full support for the recommended measures put forward in the area of taxation.

The joint project organization of the Federal Department of Finance (FDF) and the Conference of Cantonal Finance Directors has developed the tax and fiscal policy thrust of the next series of corporate tax reforms and evaluated various measures.

The reforms are designed to enable Switzerland to maintain its tax appeal, strengthen its ability to innovate, and give a boost to the country as a business location. They are based on solutions that ensure legal certainty, are accepted internationally and are balanced from a fiscal policy viewpoint. Based on the results of a consultation with the cantons, the Federal Council will decide how to proceed and instruct the FDF to prepare a consultation draft.

Firstly, the joint project organization advocated that certain provisions in Switzerland's corporate tax system, which are no longer compatible with international standards, should be abolished in the interests of legal and planning certainty.

In addition, and in order to make Switzerland more attractive as a business location and from a tax point of view, the project organization recommended a package of tax measures, noting that 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 organization suggested that Switzerland therefore 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.

So far, the project organization has recommended 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 organization recommended examining in detail the abolition 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.

Economiesuisse suggests that a coordinated approach is critical to ensuring the fiscal attractiveness of Switzerland for internationally active companies, and to guaranteeing legal and planning certainty for those businesses concerned.

Underscoring that a reform of corporation tax is of major importance for Switzerland as an economic location, Economiesuisse made clear that thousands of jobs and billions of francs in tax revenues are at stake. Only the further development of the Swiss corporate tax system will guarantee fiscal competitiveness and international acceptance, and secure vital tax income for the Confederation, the body argued, maintaining that the main aim must be an effective and politically viable reform.

According to Economiesuisse, the latest fiscal recommendations put forward by the Confederation and cantons address the concerns of a broad section of industry. The federation nevertheless highlighted the importance of swiftly concretizing these proposals, in collaboration with the stakeholders concerned. Furthermore, the group stressed that the planned consultation should take place as quickly as possible.

Concluding, Economiesuisse stated that in view of the long lead time for the reform, the Confederation will be able to create the necessary financial scope for the changes, without recourse to revenue-based solutions.

TAGS: Finance | tax | business | mining | interest | royalties | fiscal policy | corporation tax | tax rates | Switzerland | tax breaks | tax reform | standards

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