Economiesuisse, the body that represents Swiss businesses, estimates that as many as 250 Swiss-based companies could be affected by the G7’s proposed new rules. Swiss-based multinationals such as Glencore will receive subsidies to maintain competitive tax rates © Gianluca Colla/Bloomberg “There are still many questions open about this agreement,” Christian Frey, deputy head of tax at Economiesuisse said. “But Switzerland will certainly be affected more than other countries.” He added: “luckily there is a whole list of things we could do. We are confident we can compensate.”
Despite a population of just 8.5m, Switzerland is home to some of the world’s biggest multinationals, such as Nestlé, Novartis, Roche and ABB. Currently, 18 of Switzerland’s 26 cantons levy currently less than the 15 per cent minimum proposed by the G7. “It is our clear goal that Zug will still rank among the locations with the most advantageous, internationally accepted tax rates in the future,” Heinz Tännler, Zug’s finance minister told the FT. “Our population has proved again and again that it is aware of the . . . needs of international companies for favourable conditions.”
The country is the developed world’s most significant jurisdiction for low corporation taxes, with an economy larger than all of Europe’s other low tax countries — such as Ireland, Hungary, Bulgaria and Cyprus — combined. The proposed Swiss measures are another sign of how difficult it may prove to implement the G7’s commitment to a global 15 per cent floor on corporation tax. Multinationals based in the Swiss canton of Zug are for example currently taxed locally at just under 12 per cent.
Where possible, however, Switzerland has acted domestically to safeguard its successful economic model. A federal technical working group is researching on how to mitigate tax rises, Frey said. Big businesses are also being consulted in individual cantons on what measures might make a difference to offset higher taxes. Analysts say that among the questions to be resolved are whether subsidies would be compliant with World Trade Organization rules. Although both issues are deeply rooted in the country’s identity, Bern has recently adopted a more outwardly conciliatory attitude towards tax reform, reasoning it has more to gain through compromise than principled obduracy. Last year, a federal act on tax reform came into force bringing national corporate tax rules in line with OECD standards.
Still, the G7 initiative, if globally adopted, will be the latest sweeping rule change imposed by the international community on Switzerland. Since the 2008 financial crisis, the country has faced mounting pressure to roll back its stringent banking secrecy laws and tighten up its liberal tax regime. Many Swiss officials bridle at the suggestion their country is a tax haven, where companies merely park their head offices for tax arbitrage. They point out that many Swiss-based multinationals are of Swiss origin and employ significant local workforces.
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