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Swiss SMEs Support Flat Tax

by Ulrika Lomas,, Brussels

10 December 2013

Switzerland's main trade association SGV usam, representing small- and medium-sized enterprises (SMEs) in the Confederation, has welcomed the "clear" decision by the Swiss Council of States to reject the people's initiative calling for an end to the controversial foreigners' flat tax regime, based on the cost of living rather than on the individual's wealth or income.

The Swiss Council of States blocked the proposal by 30 votes to nine, with three abstentions.

Insisting that the levy is a suitable and proven fiscal instrument, of considerable economic importance, SGV usam warned that abolishing the regime would lead to a revenue shortfall for the Confederation of an estimated CHF700m (USD785m) annually, and would serve to endanger 22,000 jobs. Such a measure would adversely affect Swiss SMEs in particular, especially those located in the mountain regions, the union argued.

Underlining its firm support for the flat tax regime, which currently benefits around 5,600 wealthy foreigners in the Confederation, the body emphasized that the levy yielded a total of around CHF695m last year. The lump sum system has a long tradition in Switzerland, enabling the cantons to compete with fierce international competition, the association ended.

Submitted by the Alternative Left party in October 2012, the initiative "end to tax privileges for millionaires" sought to ban the flat tax regime nationwide.

Although the regime has been abolished in five cantons in Switzerland, and tightened in four, the system still applies for direct federal tax throughout the country. However, to guarantee continued support for the levy, measures aimed at tightening the regime are to apply from 2016.

From then, the tax base for calculating direct federal and cantonal tax will be seven times the cost of living, compared with five times as is currently the case. Further, as regards direct federal tax, a minimal taxable income of CHF400,000 will apply. The Swiss cantons will be required to determine their own minimum taxable amount.

The initiative will now be submitted to the National Council, before subsequently being put to a referendum.

TAGS: tax | tax thresholds | tax rates | Switzerland | tax breaks | trade association | trade | individual income tax

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