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Switzerland Risks Losing Its Edge, Says KPMG Survey

by Ulrika Lomas,, Brussels

16 November 2016

Many multinational corporations are concerned that the key benefits of operating in Switzerland are at risk, says KPMG.

KPMG surveyed more than 850 foreign-owned MNCs with operations in Switzerland, working with the IMD World Competitiveness Center, Switzerland Global Enterprise, and the Swiss-American Chamber of Commerce.

According to KPMG, MNCs' "decision to locate their key value drivers in Switzerland is inextricably linked to their tax planning." 68 percent of respondents said that Switzerland's attractive tax system was a factor in their decision making, with a majority of participants benefiting from a privileged tax status. In addition, 40 percent of MNCs located in Switzerland are subject to the standard tax rate for at least part of their income.

KPMG said that while MNCs generally approve of the Swiss Government's Corporate Tax Reform III (CTR III) program, some doubt that the package will be implemented effectively. CTR III will abolish corporate tax arrangements that are no longer in keeping with international standards – primarily preferential arrangements at cantonal level for holding, domiciliary, and mixed companies. CTR III does however give cantons the options of introducing a special patent box regime and of applying a higher deduction for research and development expenditure.

Only 42 percent of respondents to the KMPG survey believed that a competitive tax system will be one of Switzerland's main advantages over the medium term. Fifty-eight percent said they expect Switzerland will be forced to adopt increasingly restrictive international tax standards as developed by the EU and the OECD.

Other challenges identified by the survey included high salary costs, labor law reform, and a lack of incentives for companies to innovate.

TAGS: tax | business | law | multinationals | tax planning | transfer pricing | tax rates | Switzerland | tax reform | standards | research and development | BEPS

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