Tax reform would hurt Geneva: Credit Suisse
The latest set of proposals to reform the way corporations are taxed in Switzerland would hit certain French-speaking areas hard, including the city of Geneva and the canton of Vaud, according to a just-released Credit Suisse report.
The tax reform proposals package – known as CTRIII because it’s the third in a series of proposed reforms – has been drawn up by the Swiss authorities in response to pressure from the Organisation for Economic Cooperation & Development and the G20, which have called for Switzerland’s existing preferential taxation regime for foreign corporate profits to be scrapped.
In a summary of the findings contained in its report, Corporate Taxation: Vaud and Geneva Forced to Act, Credit Suisse argues that the changes, if implemented, “will result in a tax shortfall” for Switzerland’s French-speaking cantons, with the result that “the finances of the canton of Geneva, which are already under pressure, are likely to take even more of a hit”.
“Even… the financially robust canton of Vaud” will face challenges, as its so-called ‘special-status companies’ get hit with greater tax hikes than their counterparts in Geneva, the report notes.
This is because the cantons of Vaud and Geneva are planning on retaining their tax appeal for companies by significantly reducing their standard taxes on all corporate profits: Corporate tax rates are due to fall to 13% from 24% in Geneva, and to 13.79% from 22% in Vaud (both include direct federal tax).
“In the view of Credit Suisse economists, there is therefore a higher risk that special-status companies currently based in Vaud will pack their bags and head elsewhere”, leading to “a significant fall in cantonal tax receipts”, the summary of the report’s findings continues.
“However, in the long term – and depending on the international tax environment – the cut in corporate tax rates in the cantons of Geneva and Vaud could also have the effect of attracting new companies and therefore expanding the local tax substrate.”