Tuesday 23 May 2017

Swiss voters put Berne on collision course with EU over tax laws

Pierre Moscovici
Pierre Moscovici

Michael Shields

Swiss voters seem hell-bent on setting their own politicians on a collision course with their European Union neighbours.

Earlier this month, they narrowly backed proposals to reintroduce immigration quotas with the EU, a decision that calls into question bilateral deals with the bloc and could irk multinational companies who rely on foreign workers, including German and French staff that commute into Switzerland.

On Sunday, voters blocked a proposed tax system revamp, sending the Swiss government back to the drawing board as it tries to abolish ultra-low tax rates for multinationals without triggering a mass exodus by those companies.

On Monday, the European Commission said it was disappointed that Swiss voters rejected plans to overhaul corporate taxes and will consult with EU governments on how to proceed.

The tax vote again put non-member Switzerland on a collision course with the EU, as well as the Organisation of Economic Cooperation and Development (OECD), the club of rich countries.

The Swiss had promised to meet international standards and, by 2019, end special low tax rates that benefit about 24,000 foreign companies.

"The Commission is very disappointed by the results of a referendum in Switzerland," European Commissioner for Economic and Financial Affairs Pierre Moscovici told a news conference.

"The rejection of the reform and referendum means we need to redouble our efforts when it comes to taxation. The Commission plans to consult the member states so we can decide together how to proceed," he said.

The OECD said in reaction to the referendum result that Switzerland could still meet its international obligations, but must lose no time in finding a solution.

"Switzerland's partners will expect it to implement its international commitments within a reasonable time period and this need not happen within the context of a wider reform, which could take longer than the two years originally foreseen for these changes," OECD tax director Pascal Saint-Amans said.

Most Swiss voters recognise that the country needs reform to avoid being blacklisted as a low-tax pariah.

However, new measures proposed to help companies offset the loss of their special tax status fuelled fears among voters that regular taxpayers would have to pay more.

Swiss Finance Minister Ueli Maurer warned in the vote's aftermath on Sunday that Switzerland could be blacklisted or that other countries could start double taxation of Swiss-based companies.

It could take as long as a year for the federal government and cantons to come up with a new plan - and even longer for them to implement it.

At the same time, competition on company tax rates could be ramped up by new US President Donald Trump's administration or by post-Brexit Britain. "There will certainly be other countries seeking to entice corporations away from Switzerland," Maurer told the Swiss broadcaster SRF. "That begins today."

Business leaders warn that the vote has created uncertainty and left Switzerland in legal limbo while it works out a new tax plan.

Meanwhile, policy makers are torn between the will of the electorate and the reality of the world outside. (Reuters)

Irish Independent

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