The OECD minimum taxation should ensure that multinational companies pay at least 15% tax on their profits. In Europe, implementation is already largely underway due to pressure from the EU. At a global level, however, it is still unclear whether the most important economies will implement the project. Despite the problems, Switzerland must be prepared for the fact that minimum taxation and its far-reaching effects on competition between business locations will continue to exist. How Switzerland can be economically and financially successful despite these challenges and adapt to the changed competition between business locations was the topic of this year’s Tax Talks organised by SwissHoldings.
The OECD project has taught us that the initial ambition of a project can differ considerably from its realisation and impact. The original idea was to make the international tax system fairer by, among other things, levelling out tax competition with a minimum tax. Today, however, it is clear that competition between locations for attractive and financially lucrative corporate functions is more intense than ever before. Many countries have set up specialised departments that systematically compete for desired functions of international companies. New instruments are increasingly being used for this purpose. Take Singapore’s Refundable Investment Credit (RIC), for example.
Switzerland has successfully focussed on low taxes
Switzerland has done very well financially by reducing corporate taxes in the past. Instead of reduced revenue, the bottom line was huge additional revenue for the federal government, cantons and municipalities. In 2023, the federal government alone generated additional income from profit tax of more than CHF 2.3 billion. It is therefore the tax payments of companies that significantly help to finance Switzerland’s prosperity. These must not be jeopardised by ill-considered decisions or by standing by too long. The Tax Talks held this week provided a discussion platform for high-ranking representatives of the federal government, cantons, academia and member companies of SwissHoldings to exchange views on how Switzerland can position itself and secure the lucrative tax payments of companies.
Valérie Dittli, Head of the Department of Finance of Vaud, gives the keynote speach
Switzerland needs new strategies
Switzerland should now adapt to the changed rules of the game in international location competition. Location factors that Switzerland already counts among its strengths, such as legal certainty, stability, a functioning infrastructure and a pool of well-trained specialists, will become increasingly important. These must be maintained and further expanded. At the same time, new instruments are needed. Last but not least, Switzerland must remain an attractive tax centre. Further tax increases and new types of tax must be avoided. In addition, simplifications and modernisations of outdated taxes must be tackled and adapted to the new international rules of the game. Switzerland must be able to react flexibly, as both the OECD project and international developments remain dynamic.
Close cooperation for a successful future
A cooperative approach that leaves enough room for dialogue between the players is essential for the development of new strategies for Switzerland’s attractiveness as a business location. Companies appreciate the dialogue that takes place in Switzerland with representatives from politics, the Federal Tax Administration, the State Secretariat for International Financial Matters, high-ranking representatives of the cantons and academia. This constructive dialogue is itself a decisive locational advantage for Switzerland. In addition, close cooperation between the federal government, cantons and municipalities, and in particular between the cantons’ finance and economics departments, will be necessary in order to define successful strategies. Change is always an opportunity. Now is the time to make use of it.
Contact:
Martin Hess | Head of Tax Policy, Member of the Executive Committee | +41 31 356 68 60
Claudiu A. Antal | Deputy Head of Tax Policy, COO | +41 31 356 68 69
