Switzerland’s government decided to scrap Switzerland’s unusual 1% tax on funds invested beyond CHF 1 million in Swiss companies.
However, some politicians are against the change and launched a referendum against it after collecting the 50,000 signatures needed launch a vote to undo a government decision.
Switzerland’s relatively low corporate tax rates are one reason some international businesses choose Switzerland as an international base. However, 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 now 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. Their argument is that forgoing the tax is an investment in future growth that will generate a solid return.
In addition, the EU is against such taxes, arguing that they impede the flow of capital between countries. Brussels has been working on phasing out such levies across the bloc since 1969.
However, not all politicians agree. Those behind the referendum argue that the move will reduce tax revenue and leave a hole to be filled by cutbacks in other areas.
The average annual amount collected from stamp duty over the last 20 years is just below CHF 250 million, and ranged from CHF 120 million to CHF 407 million a year. CHF 250 million is equivalent to around 0.3% of annual federal government income.
Unsurprisingly, a majority (120) of members of the National Council, Switzerland’s parliament, voted in favour of removing the tax, 70 voted against it and 5 abstained. The vote proportions were similar in Council of States, Switzerland’s upper house, with 29 in favour, 14 against and one abstention.
Regardless of what politicians think, Swiss voters will get to decide the fate of the tax on Sunday 13 February 2022.