Post by Grocott on Dec 18, 2008 8:11:12 GMT 4
Switzerland plans comprehensive tax reform
Jack Grocott
The Swiss government is proposing a corporate tax reform package that it hopes will improve the country's international tax competitiveness. It has instructed the Federal Department of Finance to prepare a draft consultation paper.
The proposals aim to simplify both the federal and cantonal tax systems while improving the fiscal framework for companies.
To improve the country's prospects for growth, issue tax and fiscal barriers affecting the financing activities of companies are to be removed.
The main element of this removal involves concerns the abolition of issue tax on equity and debt capital, as well as eliminating barriers to company financing. Professionals say Iissue tax on equity has a disincentive effect on investment and is becoming a hindrance to Switzerland's attractiveness to investors.
One of the more significant changes is the reforms of the cantonal system of taxation. There are 26 cantons in Switzerland with each retaining the power of taxation. The reform will see the modification of cantonal tax laws that govern holding companies and management companies.
Holding companies and foreign based companies are set to be the target for the reform package.
"Holding companies will no longer be accepted in Switzerland," said Daniel Schmitz, a senior tax manager, of PricewaterhouseCoopers, in Switzerland.
There are also plans to analyse the methods used by companies in the various cantons across the country. One suggestion included a shift to a uniform system of tax on profits.
"There will have to be a great amount of work at the cantonal level. It has to be passed on and adapted to all the cantons, so it is not the case of changing over night," Schmitz added.
It is also expected that, at the cantonal level, capital tax will be waived in order to strengthen the areas competitiveness.
But with little information published and tax professionals merely speculating at the moment, David Ryser, tax partner, Taxpartner Taxand in Switzerland, explains the difficulties of predicting future plans.
"I was quite surprised to see just how little detail has been developed on these ideas and it is still hard to say what the outcome of the discussions will be.
"Tactically it is a very good time to make these proposals, but, I feel that one of the biggest reasons behind these ideas is to appease the EU and show that Switzerland is committed to reform."
Despite these opinions, Ryser is confident that the discussions will reap dividends and boost the country.
"Switzerland is trying to move in the right direction and trying to find the right solution. This shows just how seriously Switzerland is taking this reform package.
"The government proved that it was aware that it must be competitive in the tax world and so this is why I am quite positive that it will work," Ryser said.
Discussions are anticipated to continue over the next few months with the reform expected to be implemented in around four years' time.
Jack Grocott
The Swiss government is proposing a corporate tax reform package that it hopes will improve the country's international tax competitiveness. It has instructed the Federal Department of Finance to prepare a draft consultation paper.
The proposals aim to simplify both the federal and cantonal tax systems while improving the fiscal framework for companies.
To improve the country's prospects for growth, issue tax and fiscal barriers affecting the financing activities of companies are to be removed.
The main element of this removal involves concerns the abolition of issue tax on equity and debt capital, as well as eliminating barriers to company financing. Professionals say Iissue tax on equity has a disincentive effect on investment and is becoming a hindrance to Switzerland's attractiveness to investors.
One of the more significant changes is the reforms of the cantonal system of taxation. There are 26 cantons in Switzerland with each retaining the power of taxation. The reform will see the modification of cantonal tax laws that govern holding companies and management companies.
Holding companies and foreign based companies are set to be the target for the reform package.
"Holding companies will no longer be accepted in Switzerland," said Daniel Schmitz, a senior tax manager, of PricewaterhouseCoopers, in Switzerland.
There are also plans to analyse the methods used by companies in the various cantons across the country. One suggestion included a shift to a uniform system of tax on profits.
"There will have to be a great amount of work at the cantonal level. It has to be passed on and adapted to all the cantons, so it is not the case of changing over night," Schmitz added.
It is also expected that, at the cantonal level, capital tax will be waived in order to strengthen the areas competitiveness.
But with little information published and tax professionals merely speculating at the moment, David Ryser, tax partner, Taxpartner Taxand in Switzerland, explains the difficulties of predicting future plans.
"I was quite surprised to see just how little detail has been developed on these ideas and it is still hard to say what the outcome of the discussions will be.
"Tactically it is a very good time to make these proposals, but, I feel that one of the biggest reasons behind these ideas is to appease the EU and show that Switzerland is committed to reform."
Despite these opinions, Ryser is confident that the discussions will reap dividends and boost the country.
"Switzerland is trying to move in the right direction and trying to find the right solution. This shows just how seriously Switzerland is taking this reform package.
"The government proved that it was aware that it must be competitive in the tax world and so this is why I am quite positive that it will work," Ryser said.
Discussions are anticipated to continue over the next few months with the reform expected to be implemented in around four years' time.