The Swiss parliament approved a corporate tax overhaul on Wednesday that it hopes will stave off the danger of it landing on a European Union blacklist of uncooperative tax havens.

The lower house of parliament backed the package, which controversially links tax reforms to extra funding for the state pension system, after the upper house approved a similar version.

The measures were approved after 114 lawmakers voted in favor with 68 against following a marathon 7-1/2 hour debate.

Business lobby group Economiesuisse welcomed the decision which it said would solve one of Switzerland’s most pressing problems.

“Businesses need as soon as possible an internationally accepted tax system and thus legal certainty in order to be able to continue to invest in Switzerland,” said Frank Marty, Economiesuisse’s head of tax and finance.

The Swiss government had proposed reforms a year ago, but were forced to go back to the drawing board after voters who feared cuts to public services or higher personal taxes threw out the earlier plan in a binding referendum.

The government has said Switzerland has suffered as a business location as a result of its current tax arrangements, which have been criticized by the European Union and the Organisation for Economic Co-operation and Development (OECD).

It plans to abolish special tax status enjoyed by 24,000 foreign companies that pay corporate tax rates in individual cantons as low as 7.8 to 12 percent, far below the 12 to 24 percent rate applied to ‘normal’ Swiss companies.

Cantons in turn will lower their tax rates for ‘ordinary’ companies to deter them from leaving. To cover the shortfall of around 2 billion Swiss francs ($2.06 billion), the federal government will lift the share of federal tax that cantons get.

To address concerns that corporations would benefit from the changes at the expense of citizens, the package boosts contributions to the state pension system by 2 billion francs a year by raising contributions from employers and workers and having the federal government chip in more as well.

– By Michael Shields, Reuters, September 2018.

Link to Reuters.

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