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IMF Urges Progress From Switzerland On Tax Reform

by Ulrika Lomas,, Brussels

06 April 2018

The IMF has warned that any further delays from Switzerland in meeting international corporate taxation standards could damage the territory's appeal as an investment destination.

The IMF has published the findings of its latest Article IV mission to Switzerland. The IMF urged that meeting these international standards "in a timely manner is critical to dispel uncertainty and avoid reputational risk that could negatively impact investment and growth."

In February 2017, the Government lost a referendum on its Corporate Tax Reform III package. It is now pushing for the adoption of tax proposal 17 (TP17), which would abolish the special arrangements for cantonal status companies and make the introduction of a patent box regime mandatory for all cantons. It would also reform the taxation of dividends.

The IMF noted that as a result of TP17 corporate tax rates are "expected to become less dispersed across firms and cantons, implying some trade off between investment and revenue."

According to the IMF, implementing the Government's proposals could lower the cost of investment for SMEs and in turn help improve competitiveness. It described the reform as an "opportunity to revisit tax competitiveness in light of international developments and to encourage research and development activities and SME investment."

The IMF praised Switzerland for having made "progress on improving tax transparency." The first automatic exchanges of information are due to take place this year, and Switzerland continues to expand its list of partner countries.

More broadly, the IMF recommended that the Government remove the tax deductibility of mortgage interest payments for private households and eliminate the taxation of imputed rental income.

TAGS: tax | investment | interest | International Monetary Fund (IMF) | corporation tax | tax thresholds | tax planning | transfer pricing | tax rates | Switzerland | dividends | tax reform | standards | trade | research and development | BEPS

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