On February 13, Swiss voters can show that they are not falling for class struggle rhetoric. The abolition of the issuance tax on equity capital is not a privilege. The aim is to eliminate false incentives and keep value creation in the country. This is also worthwhile for the workers.
Federal stamp duty has been levied since 1918. She has driven a lot of international business out of Switzerland. Traditional stamps are hardly used anymore. High time to say goodbye to the relic.
Even if countries like Germany or France don’t want to believe their voters are capable of doing this, the Swiss have often shown in referendum votes that they can put two and two together when it comes to economic issues. However, opinion polls raise doubts as to whether this will also be the case in the somewhat more complex tax issue of the abolition of the issuance tax on equity. It would be all the more gratifying if they were punished as wrong at the ballot box on February 13th.
The left-wing opponents of the proposal are once again trying to score points with false class struggle rhetoric: the federal government is losing tax revenue, big business is benefiting, while honest workers and small business owners have to foot the bill.
It’s about something completely different: Little Switzerland is in tough competition between locations. She’s been quite successful at it in the past. This has been very worthwhile for the average worker. Since 2016, companies have been paying the federal government slightly more in profits taxes than private individuals in income taxes. The richest one percent of taxpayers contributes more than 40 percent to the latter.
But now Switzerland is under pressure on several fronts: The reform of international profit taxation, directed by large high-tax countries against more agile small ones, is forcing a minimum tax rate on the cantons. Digitization – accelerated by Corona – and the strong Swiss franc are reducing margins. And the unclear relationship with the EU and deteriorating market access make it less attractive to operate from Switzerland.
Against this background, the major economic and financial policy challenge is not to lose the good taxpayers and to remain an attractive location. Eliminating stamp duty on equity, like eliminating industrial tariffs, is a smart way to do something sane to counter the pressure.
Stamp duty has long caused more damage than it brings in: Anyone who raises more than one million francs of equity in Switzerland or contributes it to a start-up has to pay one percent of it to the state – without having already made any profit with this capital has. This makes innovation and startups more expensive. As a result, raising outside capital becomes comparatively more attractive, although exactly the opposite would be in the public interest: the more solid the equity cushion, the more crisis-resistant a company is.
Last but not least, the issuance tax on equity means that it makes more sense to raise capital in another country. Its abolition is only one element in bringing issuing business back to Switzerland and thus securing new business for the financial center. Even more important is the forthcoming reform of the withholding tax.
Until now, foreign investors have only been able to reclaim the high withholding tax at great expense and incompletely. Paradoxically, with it and the stamp duty, Swiss politics ensured that international capital raising migrated to London and Luxembourg. That’s why the emissions tax now brings in little to the federal tax authorities, at just under 0.35 percent of their income.
But that’s what calculating correctly is all about. The abolition of the stamp duty makes it possible to make more out of a little less tax burden. It helps to keep good companies in Switzerland and to create new ones here. This secures added value and the public sector more, not less, tax revenue in the medium term.
It eliminates false incentives and helps those, large or small, who want to build something in Switzerland. Last but not least, the local employees benefit from this. You have it in your hands to set the right signal as a voter on February 13th.