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Swiss Socialists Oppose Corporate Tax Cut

by Ulrika Lomas, Tax-News.com, Brussels

29 October 2012


The Swiss Social Democrats (SP) have announced their intention to vehemently oppose a proposal, submitted by Liberal Finance Director Ursula Gut, aimed at cutting corporation tax in the Swiss canton of Zurich.

The party said it aims to fight the proposal “with every available means”.

Gut recently put forward the idea of significantly reducing profit tax for all corporations in the Swiss canton of Zurich from 27% currently to between 14% and 16%, warning that the canton will not be able to maintain its existing tax regime if the European Union (EU) intervenes and demands that the special tax treatment accorded to holding companies is abolished.

While underscoring the need to resolve the escalating tax conflict with the EU, the SP insisted that a coordinated approach is needed involving both the federal government and other cantons in Switzerland. Gut’s proposal will on the other hand unnecessarily fuel the issue of internal tax competition in Switzerland, the party emphasized.

The SP calculated that the finance director’s proposal would lead to a resulting shortfall in fiscal revenues of around CHF850m (USD910m) annually.

The European Commission considers certain cantonal company taxation arrangements for holding companies to be forms of state aid which are not compatible with the 1972 Free Trade Agreement. In its decision of February 13, 2007, it requested a mandate from the Council to take up negotiations with Switzerland. The mandate was adopted by the Council on May 4, 2007.

Although the Swiss Federal Council has consistently rejected the EU's interpretation, considering it to be unfounded, it has recently entered into negotiations to resolve the matter.

A comprehensive report in our Intelligence Report series, titled "Offshore For Corporates", discusses in depth the comparative merits of offshore HQs, with a Corporate Treasury section analysing how to get an optimal blend of tax-efficiency and profits and finally a study into how two types of international business can use onshore low-tax regimes in parallel with offshore jurisdictions to construct highly tax-efficient corporate structures, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp
TAGS: tax | holding company | European Commission | corporation tax | Switzerland | European Union (EU) | Europe

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