Swiss Referendum Rejects Banning State Aid Tax Rates The EU Claims Apple Got From Ireland – Forbes
I find this a quite wonderful little vote. The Swiss system always does rather interest simply because they give the citizens themselves the real power in the system through their sets of referenda. It can all be just fine what the politicians want, what the international agreements are and so on but until the citizenry itself has been asked about it it just ain’t gonna happen. And that’s what has happened here.
There’s a lot of pressure upon Switzerland to sort out its corporate income tax system. The current one allows each canton (it’s a federal country, akin to the US, although more power lies with the canton that does with an American state and less with the Federal centre) to negotiate with a company as to what the corporate tax rate applied should be. That is, the system is just like the one the European Union accuses Apple of taking advantage of in Ireland–and of course both Ireland and Apple stoutly insisting hasn’t happened at all. In Switzerland it really is true.
And so the Swiss federal government negotiated with all the foreigners and promised to be good little international citizens. At which point the people get to vote and they said Nein! (and also Non!, No! and in Romansch, No!) which is all really rather amusing:
Early returns show that Swiss voters have rejected a complex tax reform initiative which had aimed to put Switzerland in line with international standards.
The measure would have scrapped a two-track tax system that offers lower rates to foreign firms to lure investment.
Swiss broadcaster SRF reported Sunday the reform of the corporate tax rates failed.
Such differential tax rates are, by the European Union, counted as state aid and are thus, except with prior approval, verboeten. That whole Apple and Ireland tax thing is the allegation that there was a special such tax rate. The defence that there wasn’t of course. But as I say, in Switzerland the whole thing is entirely legal and of course the EU doesn’t have any power to stop Switzerland doing this.
Due to international pressure, Switzerland needs to give up special breaks for multinationals, which generate billions in tax revenue and employ some 150,000 people in the country of 8 million. To stay attractive, the plan included cantons cutting the rates they charge companies across the board. Voters feared this would have strained the public purse and increased the burden on individual taxpayers.
Well, it could of course just have been the famously independent Swiss deciding that they didn’t want foreigners dictating to them. For goodness sake, at least one past referendum rejected joining the United Nations on the grounds that that was much to much being pally with said foreigners.
The Alpine nation faces pressure from the European Union and other international bodies to eliminate sweetheart deals that individual Swiss states, or cantons, strike with globally active companies, allowing some to pay far below the official rate.
And the people said no. Which does of course rather leave everyone with a problem. For there is no mechanism at all by which something which has failed a referendum in Switzerland can subsequently be imposed.
My own solution to this problem is simply to abolish the corporate income tax altogether. Tax investors on what they get from companies (dividends, capital gains) and accept that a globalised world isn’t going to be able to capture corporate revenues inside companies. It’s a bad tax anyway, so why not?