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Switzerland Rules Out Inter-Cantonal Tax Changes

by Ulrika Lomas, Tax-News.com, Brussels

09 July 2013


The Swiss Federal Council has adopted a report underlining that there is no scope to simplify existing procedures in the Confederation aimed at avoiding inter-cantonal double taxation.

In its report, the Federal Council examines the idea of whether or not natural persons in Switzerland could be taxed exclusively in their canton of residence (main domicile). Furthermore, the Federal Council explores whether or not passive interest should be considered differently when calculating tax. Finally, the Federal Council mulls whether or not acquisition costs and social deductions could be determined by exclusively applying the tax law in the canton of residence in future.

Defending its decision, the Swiss Federal Council argues that none of these options is a viable means with which to simplify existing procedures. According to the Swiss Federal Council, any modifications to current provisions will merely impinge on the federal nature of the Confederation's tax system, and on the fiscal sovereignty of the cantons in Switzerland. The idea of harmonizing social deductions would constitute a massive attack on the federal nature of the tax system, the Federal Council warns.

The Federal Council also maintains that the system would merely become more complex, if taxation is only carried out in the canton of residence.

In her postulate (11.3624), Swiss National Councillor Viola Amherd tasked the Federal Council with submitting a report to parliament examining whether or not the current ban on inter-communal double taxation, enshrined in the country's constitution, could be made clearer and more comprehensible. Amherd stresses that current procedures are simply too complex and do not sufficiently guarantee legal security.

In Switzerland, it is in principle the responsibility of the Swiss cantons to avoid inter-cantonal double taxation. However, due to the fiscal sovereignty of the cantons, there is the risk that taxpayers with relations to several cantons are subject to double taxation. Article 127 of the constitution therefore requires the Confederation to implement any measures necessary to avoid the problem. Consequently, Switzerland's Federal Court drew up a series of regulations to meet the constitutional requirement, while at the same time ensuring, as far as possible, cantonal autonomy vis-à-vis the tax law.

TAGS: tax | interest | law | Switzerland | regulation | individual income tax

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