Swiss voters have shocked the political establishment by rejecting a proposed reform that would have brought the country’s corporate tax system in line with international standards.
The tax reforms, widely supported by the business community, would have removed a set of special low-tax privileges that had encouraged many multinational companies to set up operations in Switzerland.
Experts believe that the future of the Swiss tax system is now uncertain. The outcome of the vote could create headaches for companies banking on their implementation, and for some companies considering setting up in the country.
“They don’t know what (tax) measures will be available… It’s not a very solid basis for making investment decisions,” Peter Uebelhart, tax manager at KPMG in Switzerland, said in a video statement.
In recent years, Switzerland has come under intense pressure from G20 and OECD countries to clean up its tax system. The country faces the risk of being “blacklisted” by other nations if it does not change its tax system by 2019.
Many voters rejected the proposed tax reform, fearing it would 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 for the middle class.
The current tax system grants preferential treatment to certain companies with significant foreign operations. International tax authorities believe these rules constitute unfair subsidies to businesses.
Martin Naville, president of the Swiss American Chamber of Commerce, said it was possible voters did not understand 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, the uncertainty and credibility of the Swiss (system) has taken a big hit.”
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Swiss authorities say they will move quickly to develop a modified tax reform proposal. Naville said he hoped new rules would be developed in the coming months.
“All stakeholders must now take responsibility for developing a competitive and acceptable tax system and regaining the credibility of the famous political stability that gave Switzerland such an advantageous position,” he said in a statement.
Naville suggested that possible tax reforms in the United States and the United Kingdom could encourage Swiss-based companies to relocate, putting increased pressure on the Swiss tax base.
CNNMoney (London) First published February 13, 2017: 10:10 a.m. ET