For the third time in a row, the SP has won a referendum against parliament’s tax policy. Almost 63 percent of those who voted rejected the proposal to abolish the special tax on companies’ new equity. A Plan B for SMEs would now be conceivable.
Politics is a business with emotions. Campaigns aim at the gut and not at the head of the citizen.
The referendum is a powerful tool in Swiss politics. The instrument disciplines Parliament and often bites directly at the ballot box. From 1995 to 2019, in popular votes with an optional referendum, on average around one in four government bills failed at the ballot box. In the current legislative period, the success rate of referendum committees is even over 40 percent: Since the beginning of 2020, 6 out of 14 official bills affected have surfaced.
A series of three SP successes with referenda against parliament’s tax policy is striking. In 2017, the people scuttled the first edition of corporate tax reform; two years later, a similar follow-up bill only got through because parliament bought parts of the left and the people with additional billions for the AHV.
In 2021, the planned increase in the general child deduction for the people clearly fell through. And now the abolition of the issuance tax on company equity, desired by Parliament, has failed in a similarly clear manner. Almost 63 percent of those who went to the polls rejected the proposal. With the exception of Zug, there were no majorities in all cantons.
In view of this mood, the SP can also have high hopes of being successful at the ballot box with its ongoing referendum against the abolition of withholding tax on interest on Swiss bonds; the referendum on this is expected to take place this autumn.
Aimed at the stomach
It is easier to block reforms than to push them through. Human persistence takes care of that. The Left recently noticed this in tax policy with the 99 percent initiative of the Young Socialists: This called for a massive tax increase for capital income and fell through last fall at the ballot box with 65 percent no votes.
From a technical point of view, the supporters of the abolition of the emission tax had a good argument: This special tax on new equity, regardless of the business situation of the companies concerned, is not a clever instrument either from an economic point of view or in terms of fair distribution. Few other countries have a similar tax. But politics is a business with emotions. Campaigns are therefore aimed at the heart and not the head of the citizen.
After two years of the Corona crisis with a sharp increase in federal debt, the idea of tax cuts is currently not very popular in some bellies. In addition, according to the SRG trend survey from the second half of January also great response with the message that the template is primarily useful for large companies that do not need it.
According to federal data, around 2,000 companies have been affected by the issuance tax on equity in recent years. About half of the volume was accounted for by 50 relatively large companies, the rest by medium-sized and small companies. The thesis of the critics, according to which a tax break for “capital” would be at the expense of the workers, also found favor.
The levy is 1 percent of the new capital; there is no tax on the first million francs. Those affected by the special tax tend to be less profitable companies or businesses with large investment needs.
low impact
The abolition would have been according to a federally ordered study by the BAK research institute brought a slight revival to the economy, but even the proponents of the proposal did not expect a major boost. Because with an average volume of around 250 million Swiss francs per year, the issuance tax does not carry too much weight from an overall perspective. Three figures: It is about 1 percent of the newly created equity for affected companies, about 0.3 percent of the entire federal budget and about 0.3 per mille of annual economic output in Switzerland.
Business support for this proposal was also rather lukewarm. Many companies have different priorities when it comes to framework conditions. These include better access to highly qualified workers from non-EU countries, preventing the erosion of market access in the EU and maintaining and strengthening the research location. In terms of tax policy, the focus of business is more on reforming the withholding tax and cushioning future additional burdens as a result of the planned global minimum taxation on the profits of large corporations.
Is there a plan B?
The official business campaign for the abolition of the emissions tax appeared to various observers as uninspired. Peter Minder, Head of Communications for Finance Minister Ueli Maurer, also criticized the Yes campaign. “If Parliament decides on a proposal, the supporters should also get involved in the voting campaign,” said Minder on Sunday when asked. “The trade association was in charge of campaigning for the supporters, but it did far too little and focused on the wrong topic with the SME. The Yes campaign was barely visible.”
Hans-Ulrich Bigler, the director of the trade association, sees it differently: “Our campaign was well visible, but the bourgeois parties, with the exception of the FDP, hardly got involved.” A plan B for emissions tax would now be conceivable, which would be limited to increasing the exempt amount – for example from one million francs to five or ten million. This would make it a pure SME template. The impetus for this would hardly come from the Federal Council, but would be a matter for Parliament.
According to Hans-Ulrich Bigler, this has not yet been discussed, but this could be a possible approach. But the question is whether, after the clear verdict of the people, a longer period of humble inaction would not be appropriate. Anyone who thinks so should say the same about the rejected bill on media subsidies.