Switzerland, along with around other 140 countries, has acknowledged that large multinational enterprises should pay at least 15% tax on their profits in each country. In future, if a corporate group pays less tax in one country, it can be taxed by other countries until the 15% is reached. This concerns large multinational enterprises with an annual turnover of at least EUR 750 million. This is estimated to be a few thousand companies, although there is not enough data to allow a more accurate calculation. All other companies are unaffected.
The minimum taxation project was set up by the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty major developed and emerging economies (G20). The aim is to adapt the tax rules for large corporate groups to the digitalisation and globalisation of the economy.
The Federal Council and Parliament want to be able to introduce the minimum tax rate by 2024, and thereby create stable framework conditions and secure both tax receipts and jobs in Switzerland.
The minimum tax rate is to be implemented in Switzerland by means of a supplementary tax. This covers the difference between the effective tax rate in the canton concerned and the 15%. The receipts from the supplementary tax are to go to the cantons (75%) and the Confederation (25%). They will then be redistributed between all cantons via the national fiscal equalization system. In this way, financially weak cantons will also receive a portion of the receipts.
It is estimated that the receipts from the supplementary tax will amount to CHF 1-2.5 billion in the first year. However, it is difficult to gauge either the short- or the long-term financial impact of the supplementary tax.
The minimum tax rate will be introduced via a constitutional amendment. For this reason, a popular vote is needed. The electorate will vote on this on 18 June 2023.
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Parliament wants to be able to introduce the OECD minimum tax rate in Switzerland. A bone of contention was the distribution of the receipts from the supplementary tax between the Confederation and cantons, and between the cantons themselves. A minority wanted to grant the Confederation more than 25% of the receipts and to distribute the receipts more evenly between the cantons. This would have additionally dampened the tax competition between the cantons. The Confederation would have been able to invest its higher share of the additional receipts across the whole of Switzerland, for example in measures to increase employment incentives. The chosen distribution ratio led a minority to reject the proposal. However, the majority of parliamentarians want to be able to introduce the OECD minimum tax rate in Switzerland and are in favour of the proposal.
Securing stable framework conditions
By implementing the OECD/G20 minimum taxation project, Switzerland is securing internationally stable framework conditions for Switzerland as a business location. Since the affected corporate groups will have to pay the tax in any case, the supplementary tax ensures that tax receipts stay in Switzerland, rather than flowing abroad.
All parliamentary groups are, in principle, in favour of implementing the internationally agreed minimum tax rate. The distribution of the supplementary tax receipts between the Confederation, the cantons and the communes is based on a compromise negotiated by representatives of those entities.
The whole of Switzerland will benefit
The chosen distribution ratio allows the supplementary receipts to be used predominantly where the additional tax burden impinges most on locational appeal. Switzerland as a whole will benefit from the maintenance of locational appeal and the retention of jobs.
Equalization between the cantons
National fiscal equalization ensures that all cantons benefit from the supplementary tax receipts. The higher the cantonal share in these receipts, the higher the amount of funds flowing to the cantons under fiscal equalization. The chosen distribution ratio thus also benefits the financially weaker cantons.
Implementation based on federalism
The proposal respects federalism. For example, the cantons enforce the regulations via the supplementary tax. They are, in principle, free to decide how to use their receipts, but must take appropriate account of the communes.