Tax Proposal 17: Council of States links the proposal with AHV

The Council of States debated the tax proposal for the first time on June 7, 2018. It further expanded the planned measures, which can be found in the Federal Council's message, in order to find broader acceptance for the proposal among the parliament and electorate. In particular, the corporate tax reform was linked with pension provision.

More funds for AHV as a motivator for parliament and electorate

‍To create a socio-political balance for tax proposal 17, the Federal Council had proposed in its message to increase the minimum requirements for family allowances by 30 Fr. The acceptance in parliament and among the electorate is to be achieved in a different way, namely by linking the proposal with pension provision. Every tax franc that is eliminated by the proposal at the federal, cantonal, and municipal levels should be compensated with an additional franc into the AHV. This should be paid half by an additional 0.3% deducted from wages, equally split between employees and employers. The rest will be achieved by an increase in federal funds for the AHV. The Council of States expects revenues of 2 billion francs per year, which would additionally flow into the AHV. However, this links two reforms that really have nothing to do with each other. This is referred to as a so-called cattle trade. There is already occasional talk of a violation of the unity of the subject matter, which the constitution assumes in votes and guarantees the citizen a free decision.

Further amendments and additions by the Council of States

‍Unlike the Federal Council, which wanted to increase the taxation of dividends for participations at the federal and cantonal level to at least 70%, the Council of States sees an increase at the cantonal level to 50% as sufficient. However, it has adopted the 70% recommendation at the federal level.

The Federal Council has, unlike the USR III, rejected an interest-adjusted profit tax in tax proposal 17. However, the Council of States now sees a deduction for equity financing that high-tax cantons can introduce under certain conditions. Further changes should take place in the capital contribution principle, which allows companies to return capital contributions to shareholders tax-free. Listed companies on the Swiss stock exchange should only be able to provide for tax-free distributions of capital contribution reserves if they distribute taxable dividends of the same amount.

The final addition envisioned by the Council of States is the consideration of intra-group active loans in the possibility of a reduction in the calculation of capital tax. The Federal Council did not want to consider these. The revised proposal is now being referred to the National Council, which will discuss it during the autumn session. Further information on tax proposal 17 can be found in our series of articles.

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