Voting on February 13, 2022 – Abolition of the emissions tax

On February 13, 2022, the Swiss people will vote on the amendment to the Federal Act on Stamp Duties. The proposal from the Federal Council and Parliament aims to abolish the issuance tax with the goal of facilitating the acquisition of equity capital for companies.

Issuance, Sales, and Insurance Tax

The issuance tax is one of three stamp duties regulated by the Federal Act on Stamp Duties (StG) from June 27, 1973, alongside the sales tax and the insurance tax.

• ‍Issuance Tax: The issuance tax is levied on the issuance of domestic securities. When a company issues shares (stocks, partnership shares, participation or profit-sharing certificates), the federal government imposes a tax. The issuance tax becomes due when a company is founded or when its equity capital is increased.
• ‍Sales Tax: The sales tax applies to the sales or trading of certain domestic and foreign securities.
• ‍Insurance Tax: The insurance tax targets the premium payments of certain insurances.

The amount of the issuance tax is one percent of the raised equity capital, with a tax-free allowance of one million francs.

Example: If a company raises 1.5 million francs, it must pay an issuance tax of 5,000 francs on the amount exceeding the tax-free allowance of CHF 500,000.

In addition to the tax-free allowance, the legal regulations for the issuance tax provide various exemptions. Under certain conditions, nonprofit organizations, such as housing cooperatives, are exempt from taxation.

Economic Importance of the Issuance Tax

According to the Federal Tax Administration (ESTV), around 2,300 companies paid the issuance tax in 2020. Since some of these companies raised equity capital multiple times, there were over 2,500 transactions in total. A total of 2.2 percent of the transactions generated 51.5 percent of the tax revenue, while the remaining 48.5 percent of tax revenue came from the other 97.8 percent of transactions.

According to the ESTV, the revenues from the issuance tax fluctuate significantly, without a clear trend discernible either upwards or downwards. In the past twenty years, the lowest value was 120 million francs (2005) and the highest value was 407 million francs (2017). On average, revenues amounted to around 250 million francs.

Referendum Against the Proposal from the Federal Council and Parliament Initiated

The proposed amendment to the StG aims to abolish the issuance tax. Consequently, companies could raise equity capital in the future without having to pay taxes on it. The National Council endorsed the amendment with 120 yes votes against 70 no votes and 5 abstentions. In the Council of States, the revised text of the law was accepted with 29 yes votes against 14 no votes and one abstention. A referendum was initiated against the proposal from the Federal Council and Parliament.

Arguments For

Supporters of the proposed amendment foresee positive effects on the overall economy, attractiveness of locations, and jobs from the abolition of the issuance tax.

• ‍Secure Jobs: The Federal Council and Parliament argue that the issuance tax would hinder Swiss economic growth by increasing the cost of investments. The abolition of the tax, on the other hand, would promote positive corporate developments and secure jobs.
• ‍Hardly Internationally Widespread: The issuance tax is described as an internationally rare burden. Apart from Switzerland and Liechtenstein, only Greece and Spain in Europe have a comparable tax.
• ‍Avoid Burdens at Inopportune Times: It is also argued that the Swiss economy experiences increased burdens during crisis situations. In economically challenging times, companies regularly need more capital. The issuance tax represents an additional burden during these already challenging times.
• ‍Reduce Debt Risk: Because the borrowing of external capital, such as in the form of loans, is not taxed, under the current law, companies are incentivized to finance their businesses through loans. The abolition of the issuance tax promises to reduce the risk of indebtedness.
• ‍Not Disadvantage Young Companies: Unlike established companies that can regularly finance their investments through retained earnings, particularly young companies rely on the creation of equity. This disadvantage will be eliminated if the proposal is accepted.
• Issuance tax is unfair: Because the issuance tax applies regardless of whether an investment proves profitable or not, and therefore economic performance is disregarded, the current regulation is often perceived as unjust.
• ‍Offsetting New International Rules: Last but not least, the supporters of the proposal argue that the OECD may soon decide on an internationally valid minimum tax for companies. In this case, there is a risk that Switzerland will lose its locational advantage due to low profit taxes. The abolition of the issuance tax could counteract this loss.

Arguments Against

The referendum committee justifies the requested rejection of the new draft law with the expected shortfall in the state budget. Furthermore, they criticize that mainly financially strong large corporations, banks, and insurance companies would benefit from the change.

• ‍Deficit in the State Treasury: Opponents of the proposal fear that the expected loss of tax revenues of 250 million francs will lead to cuts in services or that it will have to be compensated for by increased taxation of private individuals.
• ‍Preferential Treatment of the Financial Sector: Furthermore, the abolition of the issuance tax would further favor the already privileged large corporations, especially from the financial sector.
• ‍No Advantages for Young Companies: Contrary to the statements of the Federal Council and Parliament, the proposal would also hardly promote investments. In 2020, with the proposed abolition, just 55 large corporations would have received over 50 percent of the new privileges. In contrast, the startups and SMEs that are important for the Swiss economy would gain nothing from the changes.

Source: Explanations of the Federal Council regarding the referendum on February 13, 2022, amendment of the Federal Act on Stamp Duties, p. 36 ff. (Voting booklet).

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