Swiss voters reject corporate tax reform

Voters in Switzerland have shocked the political establishment by rejecting a reform plan that would have brought the country’s corporate tax system in line with international standards.

The tax reforms, which were 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 shop in Switzerland.

Experts say the future of Switzerland’s tax system is now unclear. The result of the vote could create headaches for companies that had bet on its implementation and deter companies that had been considering moving to the country.

“They don’t know what [tax] measures will be available… That’s not a very strong basis for making investment decisions,” Peter Uebelhart, KPMG’s head of tax in Switzerland, said in a video statement.

Switzerland has come under intense pressure from G20 nations and the OECD in recent years to clean up its tax system. The country risks being “blacklisted” by other nations if it does not change its tax system by 2019.

Many voters rejected the tax reform package fearing it could reduce the amount of revenue collected by the government, according to Stefan Kuhn, KPMG’s head of corporate tax in Switzerland. That could have led to tax increases on the middle class.

The current tax system grants preferential treatment to some companies with large operations abroad. International tax authorities say the rules amount to unfair corporate subsidies.

Martin Naville, director of the Swiss-American Chamber of Commerce, said voters may not have understood the intricacies of the reforms. The measures were rejected by 59% of voters.

“I think it’s a very bad day for Switzerland,” Naville said. “Clearly, uncertainty and credibility in Switzerland [system] He’s taken a massive hit.”

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Swiss authorities say they will move quickly to create an amended tax reform proposal. Naville said he expects new rules to be drafted in the coming months.

“All stakeholders now have to take responsibility for developing an acceptable competitive tax system and regain credibility with regard to the famous political stability that gave Switzerland such an advantageous position,” it said in a statement.

Naville hinted that potential tax reforms in the US and UK could tempt Swiss-based companies to relocate, putting more pressure on Switzerland’s tax base.

CNN Money (London) First published on February 13, 2017: 10:10 am ET