Uniform lower tax would end EU opposition, canton says
Bern should pitch in to cover losses
GENEVA, SWITZERLAND – The European Union continues to pressure Switzerland to end “tax dumping”, the practice of giving fiscal benefits to holding companies. Meanwhile at home some media and watchdog groups are suggesting that corporate tax deals in Switzerland are indeed bringing in tax revenues at the expense of countries where goods and services are produced.
Geneva is particularly in the firing line, thanks to the substantial growth of commodity trading companies in the canton during the past decade, in addition having a large number of multinationals based in the city.
Geneva is fighting back. Thursday the canton said it wants to abolish the special deals that allow a company with 80 percent of its activities outside Switzerland to pay a lower tax—by lowering all corporate taxes to a uniform rate of 13 percent, about half of the current rate for non-holding companies and just a nod higher than Ireland’s 12.5 percent rate on profits from trading.
Ireland has had a running battle with other EU members, notably France, over its own rates, so Geneva’s move to reduce flak from the EU raises questions about how the revenue loss can be made up and whether this will soothe EU ire. Neuchatel has moved to a uniform tax rate and according to Thierry Grosjean, a politician in the canton interviewed by RTS, the decision to be pro-active has had positive results.
What the numbers show
Geneva clarified its own situation Thursday by sharing numbers from a Crea research institute report it commissioned:
- 945 holding companies that benefit today from reduced tax rates
- the 945 employ about 20,000 people directly and generate CHF1 billion in tax revenues
- the holding companies also are indirectly responsible for a total of some 50,000 jobs and about one-quarter of the canton’s GDP (gross domestic product)
- if the tax rate fell to a uniform 13 percent, the canton would realize CHF457 million in tax revenues, less than half of what it currently sees.
The canton is pushing for a national discussion on the taxation system, arguing for example, that the share cantons receive from the federal tax paid by companies could be increased. Vaud said earlier this year it is interested in exploring tax initiatives with Geneva in order for both to ensure they remain competitive in attracting foreign companies.
Articles in the Tribune de Geneve and RTS public television, 11 October
Council of Europe Parliamentary Assembly report “Promoting an appropriate policy on tax havens”, 5 April 2012, including a section on tax dumping issues.