Swiss voters have shocked the political world by rejecting a reform that would have brought the country’s corporate tax system in line with international norms.
The tax reform plan, which has broad support from the business community, would eliminate a range of special low-tax incentives that have encouraged many multinational companies to set up factories in Switzerland.
Experts say the future of Switzerland’s tax system is currently unclear. The vote could spell trouble for companies that have been counting on the system to be implemented and discourage those considering relocating to the country.
“They don’t know [tax] All sorts of measures will be taken … This is not a very solid basis for making investment decisions,” Peter Uebelhart, head of tax at KPMG Switzerland, said in a video statement.
In recent years, Switzerland has faced enormous pressure from G20 and OECD countries to clean up its tax system. If Switzerland does not change its tax system by 2019, the country will face the risk of being put on a “blacklist” by other countries.
Many voters rejected the tax reform proposal because they feared it could reduce government revenues, said Stephen Kuhn, head of tax at KPMG Switzerland. This could lead to higher taxes for the middle class.
The current tax system gives preferential treatment to some companies with large overseas operations, rules that international tax groups say amount to unfair corporate subsidies.
Martin Naville, president of the Swiss-American Chamber of Commerce, said voters may not understand the complexity of the reforms. 59% of voters rejected the measures.
“I think this is a very bad day for Switzerland,” Naville said. “Obviously, there is uncertainty and credibility in Switzerland. [system] It was a huge blow.”
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Swiss authorities have said they will move quickly to develop revised tax reforms, and Naville said he hopes to have new rules in place in the coming months.
“All stakeholders must now take responsibility for developing an acceptable, competitive tax system and regaining the credibility for the famous political stability that has made Switzerland so well-positioned,” he said in a statement.
Naville suggested that potential tax reforms in the United States and Britain could tempt Swiss companies to relocate to Switzerland, putting further pressure on the country’s tax base.
CNNMoney (London) First published on February 13, 2017: 10:10 AM EST
