Swiss Public Souring on Tax Breaks for Companies as Vote Nears

Swiss voters will weigh in this weekend on a tax cut for companies, possibly signaling the limits of Switzerland’s hospitality towards business.

On the Feb. 13 ballot is the question of whether to abolish a stamp duty that applies to financing new capital in excess of one million Swiss francs ($1.08 million). It currently brings around 250 million Swiss Francs per year into the public purse.

“For many, many years in Switzerland there was a very healthy cohabitation between big corporates, politics, and the man on the street, because people knew that if businesses are healthy, then they do well—there’s jobs, there’s growth,” Christoph Suter, partner and head of Bär & Karrer’s tax team in Geneva, said. “This has changed in the last few years.”

A January poll indicated that 53% of those who wish to participate in Sunday’s referendum would vote against repealing the tax.

In Switzerland’s direct democracy, a petition with 50,000 signatures can trigger a referendum on new legislation. Public consent for corporate tax cuts—and other controversial measures—is thus far more important than in representative democracies, where elected lawmakers can sometimes choose to ignore public opinion.

“This is not an important vote in terms of financial impact, but it is a directional vote,” Suter said.

Shifting Opinions

Several high-profile referenda on corporate taxes have failed in recent years, and polling suggests the vote this weekend will also end with a no—meaning the 1% tax on financing capital would remain.

“These two last votes tend to show that people are a bit fed up,” said Samuel Bendahan, vice president of the Swiss Social Democratic Party, citing discontent with giving money to people who are “really rich,” instead of helping ordinary people with the rising cost of living.

About 2,300 companies pay the stamp tax; among those, around 50 of the largest companies together accounted for 51.5% of the total paid in 2020, government data show.

However, tax experts say that largest companies are better able to avoid the stamp duty, using mergers and other maneuvers, than smaller companies that are unable to take advantage of such tactics.

SIGN UP for The Exchange, our free weekly tax newsletter.

It is small and medium-sized enterprises that are the most crunched, said Jean-Philippe Kohl, vice director and chief economist for Swissmem, which lobbies on behalf of technology companies.

The stamp tax in question is one of three similar taxes in Switzerland that have been the subject of a removal effort since 2009, noted Richard Wuermli, managing partner of Tax Expert International AG. The three stamp taxes brought in about 2.2 billion Swiss francs in 2021, official figures show.

The impact of enacting three new tax breaks would have been too great to gain parliamentary support, so lawmakers agreed to pass an amendment abolishing just the stamp duty on financing capital, which is what voters will address on Sunday.

“Each of the parts seems a bit small, but together the whole reform is extremely, extremely expensive,” said Bendahan, whose party helped organize the campaign to keep the stamp tax, via the referendum. “We are fighting, actually, the whole thing, not just this one.”

Try, Try again

Every person interviewed for this story expects the public vote to go against abolishing the tax.

“The chance that it is a ‘no’ is very, very high,” said Noëmi Kunz-Schenk, a tax expert for Wenger Vieli in Zurich.

That might not be the end of the effort to remove the stamp duty. Such amendments often come back around over several years, packaged with another reform or linked to a public benefit, Kunz-Schenk, Suter and Wuermli said.

Even opponents are open to the idea of removing the stamp tax, if there are tax increases to offset it, such as a capital income earnings tax, said Bendahan.

“I think it’s a bit of a balance,” Kunz-Schenk said. “We’ve had a lot of votes in favor of business in the past, and there’s hardly anything in return for the individuals.”

“This will just be a political signal that for the time being the people have had enough of all these tax reforms,” she said.