The Federal Council has decided to remove the 1% investment stamp duty charged on capital invested in Swiss companies. A majority of parliament are also in favour of the decision. However, some politicians are against the change and have launched a referendum against it. This week the government defended its plan.
Switzerland’s relatively low corporate tax rates are one reason some international businesses choose Switzerland as an international base.
In recent years, Switzerland has come under international pressure to change how it taxes certain international companies. The first thing to go was the special reduced tax rates Switzerland charged some foreign companies. In response to this Switzerland introduced lower universal company tax rates to reduce the incentive for mobile international companies to leave. More recently, the OECD agreed to set a minimum company tax rate of 15% internationally. This will force Switzerland’s hand once more and eventually require it to raise universal company tax rates.
Given this shift in international company tax rules, the Federal Council argues that it is important to remove the 1% stamp duty levied on capital injections into Swiss companies in order to maintain the attractiveness of Switzerland as a destination for the internationally mobile businesses drawn there. In addition, removing the duty will boost economic growth, it says.
The 1% stamp or capital duty is levied on any money invested in a Swiss company beyond CHF 1 million. This hits high-growth companies hardest.
The EU is against such taxes, arguing that they impede the flow of capital between countries. Brussels has been working on phasing out capital duty across the bloc since 1969.
However, not all politicians are behind the Federal Council’s plan. Those organising a referendum against the move argue that it will reduce tax revenue too much and leave a hole to be filled by other taxpayers.
The Federal Council argues that the economic boost from removing the duty will cover the revenue lost from phasing out stamp duty. Raising company tax rates to meet the OECD’s new 15% minimum company tax rate in the future could help too.
The average annual amount collected from stamp duty over the last 20 years is just below CHF 250 million, and ranges from CHF 120 million to CHF 407 million a year. CHF 250 million is equivalent to around 0.3% of annual federal government income.
Regardless of what politicians think, Swiss voters will get to decide the fate of the tax on 13 February 2022.