The new tax rules for corporations are intended to flush large sums of money into the coffers. The political distribution battle will be exciting. The Basel SP finance director warns her party colleagues to be careful.
Basel City Councilor Tanja Soland is opposed to a complete redistribution of the additional income from the OECD minimum taxation.
First the undisputed part: everyone agrees from left to right that Switzerland should quickly implement the OECD rules on minimum taxation for large corporations. On Friday, the Federal Council submitted its proposals for consultation.
The second part is all the more fiercely contested: How should the expected additional income be distributed and used? It’s about large sums, the experts assume from 1 to 2.5 billion francs. This question not only divides the political camps. The cantons also have different interests. The millions are likely to bubble up the most in cantons with many affected companies and low tax rates, such as Zug, Basel-Stadt or Vaud. For them, the Federal Council proposal is attractive: it provides for the money to be left where it is incurred.
For poorer cantons, on the other hand, additional redistribution beyond fiscal equalization would be tempting. All cantons together should now try to find a common denominator in the conference of finance directors.
SP wants to reduce health insurance premiums
In terms of party politics, on the other hand, the first tough announcements are already being made: “If the bill comes to the polls in this form, we will be forced to fight it.” Cédric Wermuth, the co-president of the SP, made this statement, which at first glance seemed astonishing. Since when is the left opposed to corporations having to pay more taxes? “We know exactly what the bourgeoisie and the economy are up to,” says Wermuth: They wanted to use the reform as an excuse to introduce tax cuts for the rich and new subsidies for corporations at the cantonal level. “We will prevent that.”
Wermuth emphasizes that the reform must also improve the purchasing power of the population, especially in view of the inflation and the foreseeable surge in health care costs. The SP intends to pass part of the expected additional income directly to the people, for example in the form of lower health insurance premiums.
Basel would voluntarily give up a part
“I strongly advise against distributing income that we don’t even know if it will actually arrive,” says Tanja Soland, the finance director of the hard-hit canton of Basel-Stadt. When asked, the SP government councilor emphasized that it was completely unclear today whether additional income could actually be expected and how high it would be. “If things go badly, we even have to reckon with losses.”
Soland refers to the second part of the OECD tax reform, which aims to shift the tax base from the producing to the market countries. If this project is implemented, Basel and its pharmaceutical companies will have to fear severe losses. That is why Soland is also opposed to another idea that is popular with leftists and some of the cantons: the entire additional revenue from the minimum tax could be distributed equally among all cantons or transferred to the federal government. “We are open to giving up part of our possible additional income,” says Soland, “but a complete redistribution would go too far.”
“That should also be in the interest of the SP”
The government councilor does not want to completely rule out a link with higher social benefits. But: “From our point of view, it makes more sense to do something for the location with this reform in order to secure our tax revenue.” In Basel, people are thinking of strengthening the university, higher contributions to research and development in companies and larger contingents of skilled workers from countries outside the EU.
Above all, Tanja Soland hopes that a fundamental decision will be made soon so that the companies have legal certainty. Everything else can be discussed later, when the reform law is being discussed and it is clear how tax revenues will develop. “Now we should make a quick decision, after all, it’s about raising taxes and maintaining the attractiveness of the location – that should also be in the interest of the SP.”
Open ears in the middle party
Politically, the center party is likely to play a decisive role. Here the demands from the left are met with a certain openness: “I think the economy will understand if we use part of the additional income in such a way that the general public benefits,” says Erich Ettlin, member of the Central Council of States. However, there are two differences to the SP: According to Ettlin, the money does not necessarily have to go straight to people’s wallets. From his point of view, higher cantonal contributions to training and further education institutions would also be suitable to increase approval for the reform.
And: In contrast to the SP, Ettlin believes that the cantons should decide independently on these measures. Because the situation, for example, with the reduction in health insurance premiums, differs greatly from region to region, national requirements do not make sense.
Ettlin calls on the cantons to coordinate and create transparency: they should work with federal experts to determine which tax and other measures they consider permissible and implementable. “It’s important that people know what’s planned before the vote.” Ettlin believes that Switzerland should exhaust all permissible tax options. In addition, various measures are conceivable, such as one-off contributions to land purchases for new settlements and expansions, as is also the case abroad.
Tax cuts for top earners?
The Zurich FDP Council of States Ruedi Noser, on the other hand, vehemently rejects the demands from the left: “There will be no ‘horse trading’.” Noser is confident that the reform will find a majority if the cantons agree on a solution. “I expect them to pull themselves together.” He advocates introducing the minimum tax now and fixing the details of the distribution later when there is more clarity. “Starting a national redistribution exercise now would be sheer nonsense.”
Ruedi Noser is willing to talk about the controversial issue of new location measures. Although Switzerland has had good experiences with not subsidizing companies, it has also not levied excessive taxes on them. “Now, unfortunately, the OECD is forcing us to change our strategy. We have no choice but to go along with it.” The cantons would have to decide individually on the measures. It is clear that individual cantons should also consider tax cuts for top earners.
SVP wants to let cantons do it
The SVP is also committed to a federal solution: “It is obvious that the money should remain in the cantons where it is incurred,” says parliamentary group leader Thomas Aeschi. With the implementation of the minimum tax, a serious encroachment on cantonal tax sovereignty is taking place anyway. “The minimum is that the cantons can keep the resulting income and use it as they see fit.”
Aeschi emphasizes that there is no reason to dictate to the cantons how the funds are to be used. “They are sovereign and know best what measures are indicated for them.” Aeschi also emphasizes that the effects of the reform are unclear. For example, he assumes that, contrary to popular belief, his home canton of Zug could emerge as a loser from the project.
Aeschi rejects the SP’s demand for new social benefits for two reasons: On the one hand, the money should not be distributed before it is received. On the other hand, a worldwide recession in a strongly inflationary environment, a stagflation, must be expected. “We should now be careful and refrain from new expenditure of this magnitude.”