Swiss voters shocked the political establishment by rejecting a reform plan that would have brought the country’s corporate tax system into line with international standards.
The tax reforms, widely supported by the business community, reportedly removed a set of special reduced tax privileges that had encouraged many multinational companies to locate in Switzerland.
Experts say the future of the Swiss tax system is now uncertain. The result of the vote could create headaches for companies that had bet on their implementation and deter companies that were considering setting up in the country.
“They don’t know what [tax] measurements will be available … This is not a very solid basis for making investment decisions, “said Peter Uebelhart, KPMG’s tax manager in Switzerland, in a video statement.
In recent years, Switzerland has come under intense pressure from G20 countries and the OECD to clean up its tax system. The country runs the risk of being “blacklisted” by other nations if it does not change its tax system by 2019.
Many voters rejected the tax reform package for fear that it would reduce the amount of revenue collected by the government, according to Stefan Kuhn, corporate tax manager at KPMG in Switzerland. It could have led to tax hikes for the middle class.
The current tax regime grants preferential treatment to certain companies with significant operations abroad. International tax authorities say the rules constitute unfair subsidies to businesses.
Martin Naville, president 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 really bad day for Switzerland,” said Naville. “Obviously, the uncertainty and the credibility of Switzerland [system] took a huge hit. ”
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Swiss authorities have said they will move quickly to create a modified tax reform proposal. Naville said he hopes new rules will be developed in the coming months.
“All stakeholders must now take responsibility for developing a competitive and acceptable tax system and regaining credibility regarding the famous political stability which has given Switzerland such an advantageous position,” he said in a statement. .
Naville hinted that potential tax reforms in the United States and the United Kingdom could encourage companies based in Switzerland to relocate, thereby putting more pressure on Switzerland’s tax base.
CNNMoney (London) First published on February 13, 2017: 10:10 a.m. ET
