Top Swiss Finance Official Says Tax Reform Remains ’Urgent’

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By Bryce Baschuk

Swiss Federal Councillor Ueli Maurer said there’s an “urgent” need to reshape Switzerland’s corporate tax regime following the historic tax cut in the U.S.

Speaking to members of Switzerland’s executive branch on Jan. 11, Maurer said he expects Swiss parliament will take up a proposal known as “Tax Package 17” (STR 17) during their spring legislative session, which lasts from Feb. 26 to March 16.

The proposal seeks to cut corporate taxes and provide greater legal certainty for roughly 24,000 Swiss-based multinational companies like Nestle SA, Novartis AG, and ABB Group Holdings Pty Ltd.

“The urgent need for action has increased further as a result of the international trend towards the lowering of corporate taxes,” the Swiss Federal Department of Finance said in a Jan. 11 news release.

Parliamentary debate could conclude in the 2018 autumn legislative session and the first STR 17 measures could come into force at the beginning of 2019, Maurer said.

‘Tax Package 17’

Switzerland’s latest tax proposal would end the special tax status for holding companies and provide various new tax benefits aimed at preserving the alpine nation’s favorable tax environment for multinational companies.

Specifically, the proposal would permit Switzerland’s 26 cantons to reduce their headline corporate tax rates, offer new deductions for research and development expenditures, and establish preferential tax regimes for science and innovation investments, known as patent boxes.

Switzerland’s tax reform effort also seeks to align the country’s tax regime with the international requirements of the OECD’s Base Erosion and Profit Shifting project and the European Union’s anti-tax avoidance directive.

Last month, the European Union added Switzerland to its “grey list” of non-cooperative tax jurisdictions as a result of the country’s failure to reform its corporate tax regime.

Politically ‘Demanding’

Maurer said he expects parliamentary debate over the proposal will be politically “demanding” and urged parties to accept compromises to ensure the legislation passes.

“For a sustainable majority to be achieved and for both competitiveness and jobs to be maintained, a high degree of willingness to compromise on the part of all parties concerned is indispensable,” the Federal Department of Finance news release said.

Switzerland’s Social Democratic party has criticized the proposal because it only partially taxes shareholder dividends and offers a meager increase in child allowances.

Last year, the Swiss Social Democrats led a successful referendum effort that overturned the Swiss government’s 2016 tax reform law.

Swiss law provides citizens with the ability to launch a referendum vote on any new law as long as at least 50,000 signatures are collected.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bloomberglaw.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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