Schwyz votes to remain a fiscal paradise

Schwyz is going down the road to more tax cuts Keystone

Residents of canton Schwyz on Sunday voted to accept tax cuts aimed at attracting wealthy residents and businesses.

The canton, which has one of the lowest corporate and personal tax rates in the country, is the second to revise its tax laws this year, after Obwalden did so on January 1.

The vote centred on proposals to lower tax on the net assets of individuals and on share dividend income, which is subject to double taxation in Switzerland at company and shareholder level.

Schwyz cantonal authorities said on Sunday that the proposals had been accepted by a majority of voters. Voter turnout was 36.8 per cent.

Families are also set to benefit from the reforms, which include an increase in deductions on tax made for children.

The canton has estimated that it is set to lose SFr40 million ($30.6 million) from the tax revisions, but estimates that the arrival of wealthy residents could make up for this.

Officials are hoping that more people will follow the example of Marcel Ospel, the head of Switzerland’s largest bank UBS, who recently moved to the central Swiss canton.

Heated up

The competition among cantons to entice rich people and international companies with the lure of low taxes has heated up. On January 1 this year Obwalden introduced the lowest corporate rates in the country.

A recent survey showed that 18 of the 26 cantons intend to lower their taxes this year.

However, canton Zurich has accused others of freeloading on their amenities and officials have agreed to set up a working group to review taxation guidelines.

Part of the debate centres around Obwalden’s decision to also introduce a degressive (or regressive) income tax system that reduces rates as income rises.

Obwalden reduced taxes for all residents, but especially for those earning over SFr300,000 ($233,000) a year.

The centre-left Social Democrat Party initially raised an objection, but the baton has been taken up by communist parliamentarian Josef Zisyadis, who moved from Lausanne to Obwalden to oppose the tax changes.

Zisyadis, along with three other Obwalden residents, has lodged an appeal with the Swiss Federal Court on the matter.

If the Federal Court decides there is a case to answer it will set a legal precedent, according to tax experts.

swissinfo with agencies

Key facts

The results of the Schwyz tax vote:
For: 22,251 votes
Against: 10,783 votes
Voter turnout: 36.8%

In brief

Switzerland sets some of the lowest corporate tax rates in the world, attracting multinational companies to set up holdings in cantons such as Zug, Schwyz, Nidwalden and Obwalden.

Last year the European Commission questioned whether tax breaks to entice foreign firms to Switzerland contravened the 1972 Free Trade Agreement. The EC will decide by the end of next month whether to impose penalties on Switzerland.

The Swiss government is coming under increasing pressure from the centre-left Social Democrat Party to scrap tax breaks for around 3,000 wealthy foreigners living in Switzerland. The Party has threatened to take the case to Brussels.