Swiss Review 6/2018

Swiss Review / November 2018 / No.6 11 there are fears that this could lead to their departure. The cantons will therefore generally reduce profit taxes. The status companies will pay slightly higher taxes in the fu- ture, while the companies that are currently not tax privi- leged, above all domestic SMEs, will pay less. This leads to large tax shortfalls, which to some extent is the price of equal treatment of all companies. To remain attractive for existing status companies, new tax privileges that are in- ternationally acceptedwill be introduced. Some important elements are the patent box (lower taxation of income from patents), special deductions for research and development, as well as a deduction for self-financing. In return, the tax- ation of dividends for major shareholders will slightly in- crease again. The federal government is also allocating an- other billion Swiss francs from the direct federal tax to the cantons, thereby giving them more leeway for their own tax cuts. The main features of the current reform are sim- ilar to the one rejected last year, although the mechanics have been adapted in such a way that tax shortfalls should decrease slightly.. Social redistribution via OASI At this point the OASI comes into play. Pensions, like taxes, are among the major ongoing issues in Swiss politics. And the major pension reform of 2017 also failed to find favour with the voters. Nowpoliticians, especially fromthe SP, CVP and FDP, have come up with the idea of adding new finan- cial resources for the OASI to the tax bill, in the spirit of so- cial redistribution. Approximately two billion Swiss francs worth of tax shortfalls resulting fromthe tax reformwould be compensated by contributions of the same amount to the OASI. This is to be financed by increased OASI contri- butions from employees and employers as well as by in- creased federal funding of the OASI fund. Although this is not a pension reform, the proponents say that some time has been gained for a fundamental reform. Passionate debates The somewhat unusual legislative package led to passion- ate debates in parliament and among the public. It seems as though no one is entirely satisfied. It is not a good pro- posal, saidMartin Schmid, the FDP Council of States mem- ber fromGrisons, but considering the failedCorporate Tax Reform III it is the best solution. The CVP Council of States member Peter Hegglin from the canton of Zug agreed, “be- causewe need a viable solution for a serious problem”. And the SP Council of States member Roberto Zanetti from the canton of Solothurn even described the efforts of the com- mission that had drafted the bill as “a great moment of par- liamentarism”. Thewords of SVPCouncil of Statesmember Peter Föhn fromthe canton of Schwyz, whowarned against combining two failed bills, were less euphoric. Amarriage of the weak has never led to success, he said. The SVP rejected the bill in parliament, but the joint ef- fort of SP, FDP and CVP ultimately triumphed in both chambers. However, the deal wasmet with scepticismfrom almost all political camps. Various groups announced a ref- erendum right after the autumn session: the youth parties of the SVP and Green Liberals, but also the Green Party, along with other organisations from the green-red spec- trum. The left-wing criticismstates that the bill is a copy of the Corporate Tax Reform III in all essential respects and encourages international tax competition. The heads of the Swiss Trade Union Confederation (SGB) and the SP – first and foremost Paul Rechsteiner (Chairman of the SGB) and Christian Levrat (President of the SP) – have played a key role in shaping and negotiating the entire package in par- liament. The position taken by the trade unions and the SP shows the extent to which the political left is divided. The SGB declared a free vote, and although the SP base stood behind their president Levrat at an assembly of delegates, the fierce debate and the results of the vote (148 yes and 68 no) illustrate the deep divide within the party. “Swiss prosperity is at stake” For once Heinz Karrer, President of Economiesuisse, the Swiss Business Federation, is fighting alongside Levrat. If the bill fails “an important pillar of Swiss prosperity is at stake”, Karrer writes in the “Neue Zürcher Zeitung” . Swit- zerlandmust do everything it can to avoid the “catastrophic scenario of a blacklist”. Should the compromise package fail at the ballot box, the current tax rules would have to be abandoned quickly and without any palliative measures, and therewould be a sudden andmassive increase in taxes for the affected companies, which in turn could lead to large companies leaving Switzerland, he says. If the referendum is successful, the deal concerning taxes and the OASI would have to be approved by the vot- ers on 19 May 2019. The outcome is still open. The propo- nents of the bill face a heterogeneous opposition: left-wing opponents of tax cuts, right-wing opponents of OASI financ- ing, as well as legal purists who do not approve of the link between the tax bill and the OASI financing.