Switzerland is a land of referenda. Yesterday they had one on proposed corporate tax reforms and those reforms were rejected. To read the FT you would think this was a setback to tax justice:
Switzerland's attempts to overhaul its corporate tax regime have suffered a setback after voters decisively rejected reforms to bring the country's practices in line with international standards. The government had hoped to secure approval for changes that would keep corporate tax rates globally competitive while abolishing special treatment for many multinational companies. In a referendum on Sunday, however, the plan was rejected by 59.1 per cent of voters – a much larger margin of defeat than opinion polls had suggested.
This is, however, to follow the official government line on this, which was unsurprisingly heavily aligned with the big business view. For an alternative view I quote an email sent last week by long time Swiss tax activist and one time Tax Justice Network colleague Bruno Gurtner, who said:
After more than 20 years of resistance the government introduced a bill to the Parliament to abolish finally the ring-fencing privileges for holding and domicile companies allowing low or zero taxation of foreign profits of Swiss based companies, clearly harmful tax practices.
All the best now? Not at all. The proposed bill introduced at the same time a series of new loopholes and will give to the Swiss cantons the space to drastically reduce the overall company profit tax rate. The bill will allow patent boxes, reduced dividend taxation, 150 percent deduction of R&D expenditures and a new system of notional interest deduction among others. The result: an unknown amount of tax income reduction. And a win of attractiveness for a new round of dislocation. We know, a lot of other countries do also know such instruments. But the accumulation of all these measure will make Switzerland again to a paradise for profit shifting international companies.
The right wing big chamber of the Parliament even shaped the Government proposal. Therefore Socialist, Greens and Trade Unions launched a referendum. Whilst first polls gave a quite strong majority for the Government/Parliament proposal, the wind changed in the meantime. The “Stimmung” now seems to turn. People feel more and more that new taxes for individuals will be introduced or that expenditure for social, environmental, educational and international cooperation tasks will follow.
The chance is very big that we will win this vote.
What does mean that? Are Swiss voters in favor of keeping the contested privileges? Not at all. Nearly nobody in Switzerland is against the abolishment of the ring-fencing. But we want a better corporate tax reform, a reform without new loopholes, a reform which does not introduce a new round of uncontrolled tax competition (war?) between the Swiss cantons or between Switzerland and the other countries.
See it this way and what happened was a resounding rejection of another round of tax abuse creation from which big business would win and for which the people of Switzerland would pay. And they said no to that.
Good for them.
I call this a win for tax justice. Now Switzerland has to come up with new tax laws that suit its people as well as the interests of big business. If only other countries had to do the same thing we might all be in a better place.
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Switzerland isn’t just banking: it is the world’s most intensively-industrialised economy, by output per capita, and it has surprised me that the banks have been permitted to distort their economy for so long.
It’s bizarre, isn’t it?
They don’t need to be a tax haven
Wait… What? They voted down the restictive citizenship bill, too – the one that was excluding them from EU projects.
What’s changing in Switzerland, and can we get some, too?
They’re going to be wiping the floor with us…..
Not all of the empty desks around me are transfers to our offices in Paris and Hong Kong; one or two of them are traders joining hedge funds up in Bern and Zurich.
There are advantages to working among people who are far, far smarter than I am; the trick is noticing the things that they regard as important and watching what they do.
Meanwhile, the bright young graduate trainees who get those desks – a much sought-after opportunity to work on the trading floor – are smart enough to know that they’ve been offered more than a career with opportunities to work abroad: we’re giving them a lifeline.
I am painfully aware that we – our generation – have let them down abominably.
Very interesting.
But if the referedum wins, and the tax haven brigade left, what might be the consequences? It sounds minimal but……….?
I suppose the UK tax avoidance inducstry might be a beneficiary?
Most of the Swiss people I have spoken to recently expected this proposal to fail. They expect the government to come back with a similar (but watered down) version later this year which will pass.
If the new tax concessions are seriously watered down it will
I would urge you to seek out your Swiss acquaintances and offer them a pint or two, or maybe something stronger.
It seems to me that Switzerland has gone a little Ukip-ish in recent years – Cis-Alpine Gall, if you will, displacing their reserved conservatism – with overt xenophobia beginning to do real damage to their educational and economic relationships in Europe…
…And the electorate have pulled back from that.
Likewise, it seems that the creeping expansion of the bankers’ influence is now running into an effective opposition from the voters – something I regard as difficult in a federally-constituted union of equals with few central channels for that opposition – so it’s clear that something major is afoot among the complicated polity of Switzerland.
So I think that your contacts might have something very interesting to tell you, once you steer the conversation off of wine and cuckoo clocks. Be warned that it might take a *lot* of drink to do that: opening-up the reserve and reticence of the Swiss comes at a cost of an apocalyptic hangover.
Just for the record, the cuckoo clock us not a Swiss invention
How annoying of the Swiss government. Instead of accepting the referendum they clearly intend to keep re-running it until they get the answer they want.
I hope that Bruno will write a letter to the FT.