Switzerland must adjust to remain business-friendly after G7 tax deal, experts say (updated)

SF Urban Properties AG

07/06/2021 15:36

* G7 agreed on minimum global corporate tax rate of 15%
    * Many Swiss cantons attract businesses with lower tax rate
    * Switzerland has to find other ways to attract companies

 (Adds expert comment, background)
    By Silke Koltrowitz
    ZURICH, June 7 (Reuters) - Switzerland will have to find new
ways to remain attractive to business, experts said on Monday,
after Group of Seven (G7) nations reached a landmark deal to
reduce the incentive of multinational companies to shift profits
to tax havens. 
    G7 finance ministers agreed on Saturday to back a global
corporate tax rate of at least 15% to squeeze more money out of
sprawling companies such as Amazon and Google.  urn:newsml:reuters.com:*:nL2N2NN05A.
    The Swiss finance ministry said it had taken note of the
declaration of intent and would focus on competitive framework
conditions. "Switzerland will take the necessary measures to
continue to be a highly attractive business location," it said
in a statement.
    Experts said the traditionally low-tax country would have to
adjust to compensate for the impact of the reform that will be
discussed at next month's G20 meeting.
    "It is a challenge. Up to now, Switzerland was attractive
because of its favourable corporate tax rates that allow it to
make up for relatively high salaries," Martin Hess, head of tax
at Swissholdings that represents Swiss-based multinationals,
told Reuters.
    "Now Switzerland has to use different tools, but we see
abroad that there are possibilities. That is reassuring," Hess
said, noting that Germany, for example, pays part of
researchers' salaries.
    Under pressure from abroad, Switzerland reformed its
corporate tax system in 2019, scrapping special tax status for
some companies. It was back in the spotlight in April, to the
government's dismay, when U.S. President Joe Biden called it a
tax haven in a speech to Congress.
    Audit firm KPMG said Swiss corporate tax rates declined
slightly this year to 14.9% on average. However, the canton of
Zug, home to more than 35,000 companies including raw material
giant Glencore, has a rate as low as 11.9%.
    Peter Uebelhart, tax partner at KPMG Switzerland, said he
didn't expect an across the board rate of 15% to lead to an
immediate exodus. 
    "Swiss or Irish subsidiaries of international firms serve a
purpose, notably being close to European markets, and you also
have to ask where else they could go on a global level playing
field," he said.
    He said accumulating deficits in many countries meant new
rules could be pushed through quickly, so Switzerland was well
advised to think now about adjusting tax rates and other tools. 
    Dominik Gross, head of tax and financial policy at the Swiss
Alliance of Development Organisations Alliance Sud, told Reuters
cantons depending strongly on pharma, tech and retail companies
would likely see corporate income tax revenues fall.


 (Reporting by Silke Koltrowitz and Michael Shields
Editing by Gareth Jones, Kirsten Donovan)
 ((Michael.Shields@thomsonreuters.com; +41 41 528 3630; Reuters
Messaging: michael.shields.thomsonreuters.com@reuters.net))