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OECD Reports On Swiss Tax Reform Efforts

by Ulrika Lomas, Tax-News.com, Brussels

30 November 2017


The OECD has said that Switzerland's efforts to meet its international commitments to reform its corporate tax regime are welcome, but noted that there is some uncertainty around the proposed reform package.

The OECD has published its latest Economic Survey of Switzerland. In its report, the OECD stated that there is "some uncertainty around corporate tax reforms, which were initially rejected by referendum but are necessary to align Switzerland's tax system with its international commitments."

The federal Government's original proposals – the Corporate Tax Reform III package – were rejected in a referendum in February. The Government has since produced tax proposal 17 (TP17), which includes plans to abolish special cantonal tax regimes, increase the taxation of dividends, and provide for the equal tax treatment of all resident companies. It also intends to introduce a patent box regime under TP17, and to allow the cantons to introduce a super-deduction for research and development (R&D) expenditure.

The Government hopes that the new regime will enter into force in January 2021.

The OECD said that while it is "too early to assess the final reform package, Switzerland's efforts to meet its international commitments are welcome." It explained that the total budgetary impact of the reforms is also "difficult to gauge because of the complexity of the tax system and uncertainty around the cantonal response."

According to the report, in 2011, seven percent of all taxable corporate entities in Switzerland were under a special tax regime and that, together, these entities paid around half of all federal corporate taxes and 20 percent of cantonal corporate tax. The OECD said that federal government revenue is expected to be CHF755m (USD766.6m) lower in 2021, equivalent to one percent of projected revenue.

The OECD also observed that the cantons are expected to lower their corporate income tax rates as a result of the broader reform package, with some cantons having previously announced plans to reduce their rates by between 3 and 10 percentage points. It recommended that the federal Government work with the cantons to pre-announce these cuts and detail how they will cover the consequent revenue shortfalls.

TAGS: compliance | tax | tax compliance | budget | Organisation for Economic Co-operation and Development (OECD) | corporation tax | tax rates | Switzerland | dividends | tax reform | research and development | BEPS

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