Currently, Switzerland levies a withholding tax of 35% cent on income from interest. People living in Switzerland can claim most of this tax back if they declare the interest in their tax return. However, foreign residents cannot. This means Swiss companies avoid issuing bonds from Switzerland.
The federal government would like remove the withholding tax to encourage Swiss companies to issue bonds from Switzerland.
In addition, the government wants to get rid of fees (stamp duty) levied on the trading of bonds and other securities in Switzerland, a practice that is increasingly rare globally. The proposed change does not include stamp duty on the issuance of new shares – a vote to abolish this tax was rejected in February 2022.
Given the background of a shift in international company tax rules – a minimum 15% corporate tax rate across the OECD is in the pipeline for 2024, the Federal Council argues that it is now important to remove the 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, 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.
The government believes its package of changes would probably pay for themselves within a year of their implementation. The government estimates a cost of CHF 215 to CHF 275 million per year. On the other hand it expects the finance industry to expand – bond issuance in Switzerland has declined by 20% since 2010. The resulting new jobs will produce tax revenue in excess of the money lost argues the Federal Council.
However, not all politicians agree with the Federal Council’s conclusions. Those behind the referendum to strike down the government’s plan argue that the move will increase tax evasion, reduce tax revenue, and leave a hole to be filled by cutbacks in other areas. They estimate that at least CHF 480 million in tax revenue will be lost.
A majority (125) of members of the National Council, Switzerland’s parliament, voted in favour of the government’s package of changes to stamp duty and withholding tax, 70 voted against it and 0 abstained. The vote proportions were similar in Council of States, Switzerland’s upper house, with 31 in favour, 12 against and no abstentions.
The latest polls on this vote are tight with 47% in favour, 44% against and 9% undecided.