Taxation, sixteen fields of action for the Switzerland of the future

Amid light and shade, experts have developed new principles to guide tax policy discussions through a dialogue based on trust

The Swiss tax system has many advantages. It has contributed substantially to the success of Switzerland as a business location and the positive financial situation of the public sector. While tax law is important, so is tax culture.

Access to the services of the tax authorities is relatively simple and there is a trust-based dialogue in tax policy between the different user groups.

These intangible factors (called “soft” factors) ensure stability and legal certainty. In light of the initial situation, the main objective is to maintain and cultivate the strengths of the Swiss tax system.

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Achieving this goal is an ongoing challenge in itself. The group of experts has therefore formulated a set of principles which will guide future discussions on tax policy.

These principles are listed according to subject areas and not priorities.
– Taxation is primarily concerned with income and consumption.
– Tax law contributes to sustainable development and promotes innovation.
– Tax law is based on simple rules.
– The basis of calculation is broad, the rates are low.
– The tax system reduces disincentives to work.
– Taxes are neutral in relation to different forms of financing, do not prevent capital accumulation.
– The tax culture is client- and citizen-oriented; digitization echoes these goals.
– Switzerland takes a leading position in international competition between economic centres.

In addition to its strengths, the Swiss tax system also has some weaknesses. At the same time, certain existing advantages, particularly with regard to the tax culture, are being questioned and/or could be undermined.

Numerous shortcomings or controversial aspects under scrutiny

Numerous gaps or controversial aspects have already been discussed in political circles but have not yet been satisfactorily resolved.

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The group of experts has identified a number of priority areas for action.

They, too, are listed according to attribution principles rather than priorities.
– Reduce capital and wealth taxes: Reducing taxes that erode wealth strengthens business resilience, incentivizes investment, and increases Switzerland’s attractiveness for highly capitalized companies.
– Eliminate transaction taxes: Reducing transaction taxes promotes risk diversification, supports equity financing and strengthens local conditions.
– Create financing neutrality: By maintaining financing neutrality, the tax system supports the productive use of capital and thereby boosts growth.
– Ensure compensation for uncovered costs to the environment and society: incentive taxes are an integral part of the tax system and strengthen environmental sustainability.
– Promote research, development and innovation activities: The promotion of research, development and innovation activities forms the basis for improving the competitiveness and attractiveness of the business location as well as for increasing growth.
– Limit exceptions and deductions: Strict management of exceptions and deductions allows for moderate tax rates and encourages transparency and efficiency in income taxation
– Reduce rate differentiation and exceptions in value added tax: A uniform value added tax with as few exceptions as possible guarantees the state high tax revenues, avoids hidden charges for previous services and investments and is simple to implement.
– Introduce a dual income tax (follow-up recommendation): the dual income tax allows for pro-economic growth, moderate and consistent taxation of capital income through a proportional rate. – Improve work incentives (follow-up recommendation): Optimally structured income tax rates improve work incentives and thus also the utilization of the labor factor of production.
– Optimize participation deduction: An adequate participation deduction prevents multiple taxation and encourages investment.
– Broaden loss compensation: Broader loss compensation strengthens the ability of companies to take risks.
– Advance digitization: digitization simplifies and decreases the workload for participants in the process.
– Maintain ruling practice: Rulings contribute to legal and planning certainty and are a cornerstone of the Swiss tax system.
– Experiment with a client-oriented tax culture: A tax culture characterized by mutual trust and respect is an important competitive advantage that must be protected.
– Reform withholding tax: A reduction in withholding tax increases the attractiveness for foreign investors.
– Introduce a tonnage tax: The tonnage tax creates a level playing field for Swiss shipping companies in the context of international competition.

Reforms in these areas can act as a driving force for the economy.

Adjustments yes, but only in the medium to long term

They are not intended as an immediate short-term solution to the current economic situation.

However, the reforms proposed here are likely to contribute to Switzerland’s prosperity in the medium to long term.

In view of the difficult economic and financial-political situation, it is all the more urgent to focus the fiscal policy debate on measures with positive economic effects and a favourable cost-benefit ratio.

The fields of action are set out in general terms and do not yet describe concrete measures.

If the recommendations are followed, the details will have to be worked out. The financial repercussions and redistributive effects will also have to be examined.

The expert group hopes that the cantons, the business community and the scientific community will also be closely involved in the subsequent work.