Corporate tax reforms in Switzerland: The struggle of ZV Öffentliches Personals Schweiz against looming tax revenue losses
2019-01-18 12:00
Switzerland is facing tremendous international political pressure regarding the taxation of international proceeds. Under the current corporate taxation system, businesses whose headquarters are located in Switzerland but whose revenue largely originates abroad are subject to very low tax rates on their foreign profits in Switzerland. According to OECD regulations, this is a harmful tax practice and can no longer be accepted. If Switzerland continues to uphold this practice, the country risks being blacklisted and becoming the object of international trade restrictions as a consequence. The proposed policy response of the federal government is a shift of taxation from business towards citizens combined with less resources for public services. A feature by Urs Stauffer, President of CESI’s Swiss member trade union organisation ‘ZV Öffentliches Personal’ and current Treasurer of CESI.
The Swiss federal government is considering a corporate tax reform in order to fulfil the international tax requirements. However, with good reason, the government is meeting strong resistance from trade unions and civil servant organisations.
The federal government’s proposal aims to lift the privileges awarded to foreign income, while at the same time massively lowering the tax burden of all businesses by means of tax policy measures and a steep drop in corporate income tax rates in the cantons. By proceeding in this manner, the government hopes to prevent businesses that benefited from former tax regulations from moving out of the country.
Tax deficit estimates predict drastic funding problems in public services. The tax deficits resulting from the tax policy measures and drop in corporate income tax across all cantons and on the federal level are estimated to be over 4 billion Swiss francs (ca. 3,5 billion euros).
It is hard to imagine the consequences of this deficit on the funding of public services in Switzerland.
The Zentralverband (ZV) Öffentliches Personal Schweiz welcomes the elimination of harmful tax practices (tax privileges) in corporate taxation, but it stands against the planned drastic cut to corporate income tax rates. The ZV believes that the ensuing tax deficit will be the result of an irresponsible decision.
The Swiss are critical of corporate tax reforms
Many political parties and civil servant trade unions have already fought this ‘Corporate Tax Reform III’ proposed by the federal government by means of a popular referendum. With President Urs Stauffer at its head, the Zentralverband Öffentliches Personal Schweiz has been on the frontline of this fight.
Swiss voters clearly rejected the Corporate Tax Reform III with a 59.1% NO vote. In addition to tax regulation reforms made on the federal level, the cantons are allowed to adapt the corporate income tax rates on the basis of their fiscal sovereignty. The Canton of Bern was one of the first cantons to cut corporate taxes by over 20% by means of a corporate income tax reduction. In this case too, public service trade unions fought against this move alongside politicians by organising a referendum. The population followed suit by voting against the amendments to the tax laws in the Canton of Bern with 53.6% of voters rejecting them. Here too, the President of the Zentralverband Öffentlichen Personals Schweiz did a lot of political and communication work to convince the public.
In May 2019, there will be another national referendum against a new harmful ‘TP17/TRAF’ tax proposal.
Towards higher taxes and worse public services for cititzens
The combination of the tax policy measures defined by the federal government and the cantons’ corporate income tax cuts will hit towns and cities the hardest.
By means of estimates for the town of Biel, calculations show that the tax policy measures under the TP17/TRAF tax proposal combined with the canton’s corporate income tax cut affecting legal persons (businesses) will lead to a tax deficit of 50%, i.e. between 12 and 15% of the overall tax revenue.
Direct taxes are fundamentally important for the budget of towns and cities. It will be practically impossible to finance the town of Biel as before in a few years due to the predicted tax losses.
The same will happen to other Swiss towns and communes that have invested millions to attract companies – mainly through taxing the citizens – and create thousands of jobs, in the view that the corporate taxes would balance the initial investments out.
The consequences of this tax policy influenced by the federal level will lead to cuts in public services, a deterioration of quality of life linked to tax hikes – which will mainly have to be supported by the citizens.
In the future, the citizens will not approve of investments related to corporations if school and playschool infrastructures cannot be maintained, if there are cuts in the cultural field, or if open-air or public pools have to be closed.
Not only must the cantons’ tax law reforms leading to corporate income tax cuts be fought against, it is necessary to resist the Federal Government’s TP17/TRAF tax law proposal which paves the way for the cantons’ tax law reforms.
The Zentralverband Öffentliches Personal Schweiz and its President Urs Stauffer must once again commit fully to this struggle.
The ZV Öffentliches Personal Schweiz is a member organisation of CESI and its President Urs Stauffer the current Treasurer of CESI.
A video clip with an interview with Urs Stauffer, produced by the Swiss Jusos, is available here.
Picture: Urs Stauffer © ZV 2019
