Martin Hess

Leiter Steuern

This is an automatic translation, which is why errors may occur

Next Sunday we will vote on the Reform of the withholding tax (amendment on the Federal Withholding Tax Act). A successful business location is not a static entity. Every now and then it needs an update to continue to function well. One such update is the withholding tax reform. It benefits not only our members, but all of Switzerland.

Swiss large companies are clearly behind the withholding tax reform. Contrary to the arguments of the opponents, however, this is not about special rights or even tax giveaways for large corporations. The so-called “large corporations” hardly benefit financially from the withholding tax reform, because they simply do not pay any withholding taxes. But the abolition of withholding tax on bond interest allows them to bring their financing to Switzerland and to issue their bonds from Switzerland to the greatest possible extent in the future. This makes a lot of sense from an organizational point of view. Financing is a lifeblood for any company. The headquarters the center. Due to the withholding tax, financing must currently be organized around this center. This is because funds raised abroad may not flow back into Switzerland, or only to a very limited extent, and be used here for research and development, for example. This makes no sense from a business point of view. The main advantage for our members is therefore simpler financing.

Switzerland becomes attractive for investors
This simpler financing is possible because investors are investing in Switzerland for the first time. Currently, the withholding tax discourages them from buying Swiss bonds. This is because reclaiming the tax is too time-consuming, costly and often only possible to a limited extent. With the reform, this disadvantage will disappear. But how does this benefit Switzerland? For investors who already invest in Swiss bonds, such as our pension funds, this is a great advantage. This is because they can reinvest the interest payments they receive directly at a profit and do not have to wait a long time for the withholding tax to be refunded and incur administrative expenses for the reclaim. This primarily benefits the insured, i.e. Mr. and Mrs. Swiss. In addition, new investors, especially foreign investors, will invest in Switzerland, which will boost our economy and enable more spending on research and development in Switzerland, for example.

Bonds issued in Switzerland bring back business
The financial industry will benefit from the fact that major industrial companies will be able to obtain most of their financing from Switzerland in the future. This will result in higher order volumes for financial service providers and greater profits here in Switzerland. After all, every bond issued is accompanied by orders worth millions for consulting firms and law firms. In addition, bank fees often reach double-digit millions. In concrete terms, this means more jobs in this sector for Switzerland and higher tax revenues for the Swiss treasury.

Bond business is stimulated – public sector benefits twice over
The federal government, cantons and municipalities are among the biggest beneficiaries of the withholding tax reform. Thanks to the new bond business in Switzerland, they benefit from higher tax revenues. Moreover, since more investors now want to buy Swiss bonds, interest rates are falling. The public sector finances itself through bonds and thus benefits from lower expenditure on debt interest. The additional funds open up new opportunities for investment, for example in public services or the reduction of corona debt. During the pandemic, the federal government ran up debts of around CHF 30 billion. In the wake of this development, the Federal Department of Finance (FDF) decided to implement this reform as a priority in the middle of the pandemic. It is important to note that in this financially strained situation, the FDF would certainly not have decided on a reform that would have further increased the mountain of debt. On the contrary, the FDF was looking for reforms that would help reduce the huge mountain of debt without imposing higher taxes on citizens and SMEs.

The withholding tax reform is a reform that costs us little, but benefits us all: the right update, at the right time.

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