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Switzerland: Vote on tax reform scheduled for 19 May 2019

Switzerland: Vote on tax reform scheduled for 19 May

Swiss voters on 19 May 2019 will vote on the “Federal Act on Tax Reform and AHV Financing” (TRAF). At the same time, the implementation process is progressing at the cantonal level, with some cantons having held (or about to hold) referendums.

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The tax reform proposal on the federal level provides for the repeal of what are no longer internationally accepted tax regimes. Effective implementation of the tax reform, however, only would take place at the cantonal level, in the cantonal tax laws. This applies in particular to the cantonal tax rate reductions that are also part of the reform strategy but are not formally part of the federal bill.

Cantonal implementations

  • Vaud: The canton of Vaud has created premature clarity regarding the general reduction in the tax rate: a lower cantonal tax rate is already in force at Lac Léman as from 1 January 2019.
  • Basel Stadt: The canton of Basel Stadt conducted a referendum vote on 10 February 2019, and approved the proposal so that the tax rate reduction could be made effective retroactively to the beginning of 2019.
  • Berne: A referendum vote was held in Berne at the end of 2018, but the reform itself has not yet been implemented (a first step towards reducing the profit tax rate).
  • Zurich: The cantonal parliament is to consider an implementation proposal in the spring 2019. If a referendum is held against the cantonal proposal, it would be voted on in September 2019 and if approved, the effective date would be planned for 2020.
  • Zug: The cantonal government referred its proposal to amend the tax law to the cantonal parliament, and the amendment is to be considered in a first reading in April 2019 and in a second reading after the national vote in May 2019.
  • Schaffhausen and Ticino: Other cantons have not yet sent an official bill to the cantonal parliaments. 

What’s next?

If the vote on 19 May 2019 is a “yes” vote, as planned, the reform would be effective 1 January 2020. The regulation concerning a temporary special tax rate solution would be effective after the referendum vote. The cantons will thus be able to make use of this measure early in order to mitigate the de facto tax increase for those companies that plan to waive their cantonal tax status.

In the event of a “no” vote, the Federal Council would have to act quickly and determine that the tax regimes criticized by the OECD and the EU are repealed—potentially together with increasing the cantonal share of federal tax revenue and adjusting the fiscal equalization system. Otherwise, it might be possible that Switzerland could be “blacklisted” by the EU.

 

Read a 2019 report prepared by the KPMG member firm in Switzerland

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