Even if it hurts: Switzerland would do well to implement the OECD minimum tax quickly. The left demands a horrendous price for it. A second “horse trade” would be completely wrong.
Finance Minister Ueli Maurer is facing another difficult vote on a tax reform for companies.
Upside down world: The Federal Council presents a ruthless tax increase for companies – and the left does not agree. It is precisely the large corporations that are so eagerly demonized by the red-green milieu that would suffer from the reform. Nevertheless, the left threatens resistance. How should we understand this?
We are talking about the global minimum taxation for large companies, which was decided under the leadership of the OECD. The Federal Council wants to implement the guidelines at high speed. The thing smacks of coercion: Switzerland does not have to implement the reform, but if it does not, other countries may collect additional taxes from the companies concerned from 2024. This would mean that Switzerland would voluntarily forego additional income of an estimated CHF 1 to 2.5 billion per year, which would be extremely stupid.
Clumsy through ball from the canton of Zug
Can the left seriously fight such a proposal? Their exponents try their best to give this appearance. Of course, the SP has nothing against the additional income, the world is not that wrong. It’s about something else: the party doesn’t trust the cantons. She does not want to leave the decision of what to do with the additional millions to the cantons.
We’ve come this far: Even with a tax increase, the left only wants to participate if they can also dictate how the money is used. Unfortunately, their power play seems to be working: the nervousness of their opponents does not bode well.
Ironically, the finance director of the particularly exposed canton of Zug gave the SP a through ball – involuntarily, but effectively: SVP governing councilor Heinz Tännler publicly offered that his canton could voluntarily give up part of the additional income from the reform and pay it into a national fund.
In doing so, he implicitly confirmed left-wing criticism: According to this account, individual cantons – especially Zug – would receive so much money with the Federal Council’s pragmatic plan that they could endanger the intercantonal balance. For example, they could further reduce taxes for private households.
In fact, it’s the other way around: the reform will significantly reduce the differences in the tax burden, because the cantons no longer have as much leeway with large companies as they used to. But the SP strategists will continue to claim the opposite. They took note of Tännler’s clumsy solo run with delight.
Switzerland falls behind in location competition
The stakes are high. Enormous tax revenues and many jobs depend on the corporations we are talking about here. Some subsidiaries are actually here primarily because of the very mild tax climate. Keeping them might be difficult. Until now, Switzerland has been able to compensate for locational disadvantages such as high wage costs with low taxes, among other things. With the OECD reform, it will inevitably fall behind compared to other locations that currently have a higher tax burden.
The cantons can do nothing but try to compensate for this to some extent. This is extremely difficult, since targeted subsidies or privileges exclusively for the companies concerned are out of the question, either legally or politically. It is all the more important that the hard-hit cantons have enough financial leeway to take other measures.
Depending on the local situation, higher contributions to research and development, a strengthening of the universities or even tax cuts for private individuals are conceivable. One should not forget that the tax burden for high earners, especially in important cantons such as Zurich or Vaud, is not particularly attractive in a European comparison. It is also clear that these barter deals will be at the center of the political debate.
Cantons and cities should anticipate the solution
Actually, the matter would be simple: the cantons decide sovereignly and democratically which measures are most useful for them. Those who do not agree can hold a referendum in the canton. But the left has succeeded in discrediting such federalist solutions.
She would prefer a repeat of the “horse trade” of 2019: At that time, in desperation, the middle classes and the economy agreed to a cash injection for the AHV in order to push through the overdue reform of company taxes. Today the idea of increasing the funds to reduce health insurance premiums is circulating.
It would be a sign of inadequacy if Parliament were to tinker with such an irrelevant link again. It shouldn’t even be necessary. It’s up to the cantons: If they can agree on a solution, ideally involving the cities, the reform should succeed – even without “horse trading”. If they stand united for the template, the left bluff should quickly fly.