On 17 May 2013, the project organisation for the third series of corporate tax reforms published an interim report in which the thrust of the corporate tax reforms is indicated. The report recommends the introduction of substitute measures in the event of an abolition or amendment of the cantonal tax status so that the locational appeal remains intact. These substitute measures should not contain so-called ring-fencing elements (i.e. foreign income should not be taxed at a preferential rate) and should not have international non-taxation as their aim. They must be based on sound taxation principles or be in effect in at least one EU member state. If the cantons find it necessary, they should also lower their tax rates on profits. In addition, other tax measures to strengthen the locational appeal are envisaged.
The steering body is of the opinion that financial burdens due to the reform should be distributed equally. The Confederation should create room for manoeuvre for the cantons in terms of fiscal policy by using vertical equalization measures in order to cushion the decline in receipts associated with the reduction in the cantonal tax on profits. The report shows options as to how the burdens for the federal budget arising from this can be offset.
In the steering body's opinion, the existing fiscal equalization should allow fair intercantonal tax competition even under a new tax framework. Following the corporate tax reforms, adjustments to the resource equalization system will be necessary, however. In its interim report, the steering body indicates the thrust of these adjustments.
After publication of the interim report, the project organisation conducted a consultation of the cantons and the national umbrella business associations as instructed by the Federal Council. The opinions show that the approach outlined in the interim report is largely supported. In addition, the basic concept of fiscal equalization is recognised by the cantons. In the case of the measures to compensate for the adjustment burdens and the reciprocal financing principles, the opinions of the consultation participants were divided, however.
As the next step, the project organisation will specify the tax and fiscal policy measures of the corporate tax reforms. At the same time, talks with the European Commission on changes to existing cantonal tax systems will be continued. The final report will probably be available in December 2013. Based on this, the Federal Council will take a decision on the further course of action.
Project organisation for the third series of corporate tax reforms of the Confederation and the cantons
In September 2012, the Confederation and the cantons appointed a joint project organisation with the objective of reforming the Swiss corporate tax system in the tense areas of competitiveness, financing of government expenditure and international acceptance. The steering body is responsible for the overall political control of the project. It is composed of four equal representations from the Confederation and the cantons, and is chaired by the Head of the FDF, Federal Councillor Eveline Widmer-Schlumpf. The other representatives of the Confederation are State Secretary Jacques de Watteville (State Secretariat for International Financial Matters, from 1 November 2013), Serge Gaillard (Director of the Federal Finance Administration) and Adrian Hug (Director of the Federal Tax Administration). Representatives of the Conference of Cantonal Finance Directors are Peter Hegglin (Cantonal Councillor, Zug), Eva Herzog (Cantonal Councillor, Basel Stadt) and Maurice Tornay (Cantonal Councillor, Valais). The Conference of the Cantonal Governments (CCG) is represented by Roland Brogli (Cantonal Councillor Aargau).
Address for enquiries:
Fabian Baumer, Vice-Director, Head of Tax Policy, Federal Tax Administration FTA
tel. +41 31 325 31 67, firstname.lastname@example.org
Tobias Beljean, Vice-Director, Federal Finance Administration FFA
tel. +41 31 322 60 09, email@example.com
The Federal Council
Federal Department of Finance