Global Minimum Tax: Commoners can be easygoing

Could that be: A reform with a tax increase for large corporations – and the bourgeois are in favor of it, while the left is rather skeptical? This bizarre picture can be seen in the Swiss implementation of the global minimum tax for large companies. The struggle for distribution makes it possible. But for once, the commoners can be more relaxed.

According to federal estimates, without evasive maneuvers there would be additional income of CHF 1 to 2.5 billion per year.

Alessandro Della Valle / Keystone

Politicians are drawn to the treasury like gnats are drawn to a flame. This is confirmed again in the controversy surrounding the Swiss implementation of the global minimum tax for large companies. Additional income is quite possible, but the money is not there yet and the extent is highly uncertain. But the distribution battle has long since begun. The planned minimum tax of 15 percent of profits will lead to tax increases for the companies affected in most cantons; this in the form of a “supplementary tax” decreed by the federal government only for these companies. Without evasive maneuvers, there would be additional income. According to the federal estimate, it could be 1 to 2.5 billion Swiss francs per year.

Who should get this money: the federal government or the cantons where the affected companies are located? The left would like to give everything to the federal government because this restricts the tax competition between the cantons the most and the distribution of tax money is politically easier at the federal level. The right would like to give everything to the cantons, and the parties between the Poles take positions in between. The Council of States decided on Wednesday with a clear majority for the distribution key 75 percent cantons / 25 percent federal government. But in the end it may end up being more of a 50/50.

The conservatives still have fresh memories of their most recent setback in tax policy: last Sunday, the Left Party was successful at the ballot box for the third time in a row with a referendum against tax breaks for companies. For example, bourgeois fears can be heard about the implementation of the global minimum tax. In this case, there will be a referendum anyway, because the reform proposal requires an amendment to the federal constitution. According to an external study commissioned by the SP, around three quarters of the additional income – assuming there are no evasive maneuvers by the companies – is likely to be concentrated in four cantons: Basel-Stadt, Zug, Zurich and Aargau. According to the federal government, the estimates are not correct, but due to a lack of data, he does not dare to make his own estimate. The estimation uncertainty is very high, but it is clear that the large corporations affected by the reform are not evenly distributed across all cantons.

When it comes to tax increases, however, there are almost always evasive maneuvers. Therefore, the additional revenues will probably be lower than one might expect without this effect. However, the distribution key does not take into account any tax losses due to companies shifting profits. This alone calls for leaving a significant part of the supplementary tax with the cantons.

And even if 100 percent remained with the cantons, the tax competition between the cantons would decrease on balance – because the reform via fiscal equalization leads to increased redistributions from the federal government and financially strong cantons to the financially weak cantons. With the proposed 75/25 distribution key, tax competition will be further reduced.

In principle, the same applies to canton competition as to competition between private companies: it tends to lead to lower prices and/or better services. It also makes Switzerland more internationally attractive overall. How much competition you want in taxes depends on your theology book. Whether the distribution key for the supplementary tax is 75/25 or 50/50 is probably less important in terms of content than it is politically. The general balance between the cantons is primarily a matter of financial equalization anyway. But the commoners don’t have to be blackmailed. If the left fights a reform that increases taxes for large corporations and implements global standards, this would first and foremost cause the left itself to have trouble explaining itself.

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