What the Swiss Vote on Taxes Means for Multinationals

Switzerland is trying to hold on to its appeal as an attractive place for companies. In a May 19 referendum, voters will decide whether to accept or reject a new corporate tax regime to replace the special tax breaks that multinational companies now enjoy. A “Yes” vote would ensure the country is in line with international rules on corporate tax dodging. A “No” vote would force officials back to the drawing board for yet another plan to prevent international companies from picking up and leaving Switzerland.

Switzerland has committed to scrapping the preferential tax rates it currently gives to thousands of multinationals (set up with the legal status of holding and domiciliary companies) because they aren’t in line with Organization for Economic Cooperation and Development rules. On its own, the move would spark an exodus because multinationals would have to pay the same tax rate as local companies, which in Geneva is as high as 24.16%. So the government is proposing new ways for companies lower their tax bill -- for example deductions for income from patents or for spending on research and development. Some Swiss cantons have reduced their headline tax rates for companies, and others are likely to follow suit.