Consultation on Tax Proposal 17 – Part 1: The Adjustments

At its session on September 6, 2017, the Federal Council opened the consultation on Tax Proposal 17. Following the rejection at the beginning of the year of Corporate Tax Reform III (CTR III), a new attempt is now being started. Despite the rejection at the polls, a reform is urgently needed. The current corporate taxation is no longer compatible with international standards, which negatively affects Switzerland's attractiveness as a business location. This problem is to be solved with Tax Proposal 17. The consultation period lasts three months and ends on December 6, 2017. This first post discusses the adjustments. A second post is dedicated to the effects that Tax Proposal 17 would bring about.

Unchanged need for tax reform

Corporate Tax Reform III was rejected in February with 59.1% of the votes. It was already clear then that a new proposal was needed as soon as possible. Federal Councillor Maurer, head of the Federal Department of Finance (FDF), said at the time that a new proposal was not expected before the end of the year. However, on September 6, the new Tax Proposal 17 already went into consultation. This underlines the high urgency of this reform. The current corporate taxation in Switzerland no longer meets international requirements. This weakens Switzerland's attractiveness as a business location and creates political pressure from abroad.

The concrete adjustments

‍Tax Proposal 17 was thus created under high time pressure. The Federal Council states in its press release that the criticism of Corporate Tax Reform III has been taken into account in the new Tax Proposal 17. Concrete adjustments that Tax Proposal 17 would now bring include, for example, that there will be cantonal patent boxes. This means that in the future, profits from patents and similar rights will be separated from other profits and taxed at a lower rate. The maximum relief that can be approved is 90%. Furthermore, the taxation of dividends for natural persons at the federal and cantonal levels is to be increased to 70%. The cantons can even provide for further increases. In addition, the cantonal share of direct federal tax is to be increased from 17% to 20.5%.

A list of all adjustments can be found here.

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