Switzerland provides subsidies to offset the G7 corporate tax plan

Swiss-based multinationals, such as commodity trader Glencore, will receive subsidies and other incentives under the plans Switzerland is developing to keep its tax rates competitive, even as the country prepares to sign up. u The new G7 plan for a global minimum tax on large corporations.

Berne is consulting with its cantonal governments – which set their own corporate tax rates – to examine how measures such as research grants, social security deductions and tax credits could create a “toolkit” to compensate for any changes in the main tax rates, officials told the Financial Times.

The proposed Swiss measures are another sign of how difficult it is may try to implement the G7’s commitment to a 15 per cent global plan on corporate taxation. Multinationals based in the Swiss canton of Zug for example are currently taxed locally at just under 12 percent.

“It is our clear goal that Zug will always rank among the places with the most advantageous tax rates, internationally accepted in the future,” Heinz Tännler, Zug’s finance minister, told FT. “Our population has shown time and time again that it is aware of it. . . needs of international companies for favorable conditions ”.

Despite a population of only 8.5 million, Switzerland is home to some of the world’s largest multinationals, such as Nestlé, Novartis, Roche and ABB. Currently, 18 of the 26 Swiss cantons currently take less than the minimum 15% proposed by the G7.

The country is the most significant jurisdiction in the developed world for taxing low-income companies, with a larger economy than all other low-tax European countries – such as Ireland, Hungary, Bulgaria and Cyprus – combined.

Swiss multinationals such as Glencore will receive subsidies to keep tax rates competitive © Gianluca Colla / Bloomberg

Economiesuisse, the body that represents Swiss companies, estimates that around 250 Swiss companies could be influenced by the new rules proposed by the G7.

“There are also several open questions about this agreement,” Christian Frey, deputy head of taxation at Economiesuisse said. “But Switzerland will definitely be more affected than other countries.” He added: “Luckily there is a whole list of things we can do. We’re sure we can make up for it.”

Many Swiss officials are reluctant to suggest that their country is a tax haven, where companies simply park their head offices. tax arbitration. They pointed out that many Swiss multinationals are of Swiss origin and employ important local employees.

However, the G7 initiative, if adopted globally, will be the last major rule change imposed by the international community on Switzerland. Since the 2008 financial crisis, the country has faced increasing pressure to repeal its strict banking secrecy laws and tighten its liberal tax regime.

Although both issues are deeply rooted in the country’s identity, Bern has recently adopted a more conciliatory attitude towards fiscal reform, arguing that it has more to gain from compromise than principle obscurity. Last year, a federal act on tax reform came into force that puts national corporate tax rules in line with OECD standards.

In every way possible, Switzerland has acted nationally to safeguard its successful economic model.

Frey said a federal technical working group is researching how to mitigate the tax increase. Large companies are also consulted in individual cantons on measures that could make a difference to offset higher taxes. Analysts say that among the questions to be resolved are whether the subsidies will comply with World Trade Organization rules.

Most of the largest Swiss low-tax cantonment-based companies contacted by the FT, including Glencore, have declined to comment on the changes proposed by the G7. Spokesmen for Roche and Novartis said it was too early to assess the impact of the new rules.

At Nestlé, a spokesman said the company has already paid taxes in 150 countries around the world, with an effective global tariff of 24 per cent – well above the 14 per cent tariff charged in the canton of Vaud, where it has its headquarters.

A new international tax framework will need “a strong agreement between all countries” to succeed, Nestle added. “They should be consistent, provide certainty… And avoid double taxation.”

Taxes, Frey points out, were also just one element of what makes Switzerland an attractive place to do business. “We have an open labor market, a highly skilled workforce, very good education and research institutes and an excellent infrastructure,” he said.

However, the stakes are high. Corporate taxation contributes greatly to federal and cantonal revenues. In the canton of Basel-Stadt, for example, home to 201,000 residents and the pharmaceutical companies Roche and Novartis, 20 percent of government revenue – around 600 million francs a year – comes from the taxes on societies.

“Large international companies are very important to our canton,” said Sven Michal, secretary general of the Basel-City finance department. “We’re not a place where there are a lot of brass plate companies. The companies we have here employ a lot of people and pay a lot of taxes.”

Reform is “inevitable,” he said, but the federal government should be smart to help minimize the impact of new changes.

“We’re getting ready.” The most important message is that we want a reform that keeps wages and incomes here. That’s the point. “

Learn more from Chris Giles in London

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