Swiss Reforms Face A Difficult Passage

By Global Tax Weekly

Can anything good really come from referendums? It’s the purest form of democracy, but recent history suggests such plebiscites can be more of a hindrance than a help. Enough said about the UK already. But it’s worth remembering how the Irish didn’t vote the way they were supposed to on the Lisbon Treaty back in 2007. Rather embarrassingly for all concerned, Ireland had to go back to the polls until it put enough crosses in the right box.

The Swiss of course love a referendum. It’s ingrained into their unique system of direct democracy. But where taxation is concerned, this system is causing the government a bit of grief. Switzerland is considered a pariah state by some of the world’s anti-avoidance and transparency campaigners. As such, it needs quite urgently to change its corporate tax regime. This is not only to avoid the ignominy of being backlisted, the Swiss Government has warned. It will also to provide companies with much-needed clarity and certainty over their future tax obligations.

These proposed reforms attempt to tread a careful line between respectability and competitiveness. Notably, they will abolish the special arrangements for cantonal status companies, along with the federal practices on tax allocation for principal companies and Swiss finance branches. However, the legislation will also introduce a mandatory patent box regime for all cantons, provide a relief restriction, and reform the taxation of dividends from qualified participations.

Indeed, the current draft of the tax reforms bears many similarities to the proposals rejected in 2017. Rejected? By who? The people. In a referendum. And it emerged last week that the people will be the final arbiters of the reformed reform proposals too. Oh dear.

The Government is confidence that lightening won’t strike twice. But the possibility of defeat can’t be ruled out. And as if to rub salt in the wounds, it faces the prospect of defeat in three languages too. Non. Nein. And no. Again.

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