Swiss voters reject corporate tax overhaul

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Voters in Switzerland have shocked the political establishment by rejecting a reform plan that would have brought the country’s corporate tax system in line with international standards.

The tax reforms, which were supported by the business community, would have removed a set of special low-rate privileges that had encouraged many multinational companies to set up in Switzerland.

Experts say the future of Switzerland’s tax system is unclear. The result of the vote could generate headaches for companies that had committed to its implementation and dissuade companies that had considered moving to the country.

“They don’t know what [tax] measures will be available… It is not a very strong basis for making investment decisions,” Peter Uebelhart, head of tax at KPMG in Switzerland, said in a video statement.

Switzerland has come under intense pressure from G20 and OECD countries in recent years to clean up its tax system. The country risks being “blacklisted” by other nations if it does not change its tax system in 2019.

Many voters rejected the tax reform package over fears it could reduce the amount of revenue collected by the government, according to Stefan Kuhn, head of corporate tax at KPMG in Switzerland. This could have led to tax increases on the middle class.

The current tax system gives preferential treatment to some companies with large operations abroad. International tax authorities say the rules amount to unfair business subsidies.

Martin Naville, head of the Swiss-American Chamber of Commerce, said voters may not have understood the complexity of the reforms. The measures were rejected by 59% of voters.

“I think it’s a very bad day for Switzerland,” Naville said. “Clearly, uncertainty and credibility in the Swiss [system] he’s taken a big hit.”

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Swiss authorities say they will move quickly to create a revised tax reform proposal. Naville said he expects new rules to be drawn up in the coming months.

“All stakeholders must now take responsibility for developing an acceptable competitive tax system and for restoring credibility to the famous political stability that gave Switzerland such an advantageous position,” he said in a statement.

Naville hinted that potential tax reforms in the US and UK could tempt Swiss-based companies to relocate, putting further pressure on Switzerland’s tax base.

CNNMoney (London) First published February 13, 2017: 10:10 am ET

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