After rejection of CTR III: Swiss CFOs want to see increased tax competition by the cantons

On February 12 2017, the Swiss electorate rejected the Corporate Tax Reform III (CTR III) in its proposed form. On the occasion of the quarterly CFO Survey of Deloitte, more than 100 Chief Financial Officers (CFOs) in Switzerland were asked shortly after the vote what they now expect from a revised tax reform.

Although the content of the revised legislation is currently unknown, a new version of the reform will likely entail the undisputed elements of the rejected reform. More than 100 CFOs were questioned on their priorities as to which elements should be considered in the revised tax reform so that Switzerland remains, in their eyes, an attractive business location:

• 87% of the surveyed CFOs would like the law to grant the cantons extensive leeway for tax rate reductions.
• 64% prefer to retain a generous tax deduction for research and development expenses. 44% also see the Patent Box as a suitable measure.
• The Notional Interest Deduction was one of the most controversial measures of the rejected reform. Only 39% of the questioned CFOs see this as a suitable measure to be considered in a new law.

Swiss CFOs now expect all the more from political stakeholders that they come up with a compatible solution and take the necessary time for it – irrespective of the EU/OECD deadline for abolishing the tax privileges of companies by 2019.

• 59% see a legislative process in one piece to be launched as soon as possible as the most promising path. The new law should realistically come into force by 2020 or 2021.
• Only about a third (30%) of respondents favour a two-step approach, which in a first step would abolish the tax privileges by 2019, combined with a solution for the transition, and in a second step present additional potential measures.
• Likewise, the development of a completely new Swiss tax system (6%) or a “do-nothing” approach (6%) are basically not considered as an option.

Jackie Hess, Managing Partner, Tax & Legal at Deloitte in Switzerland, commented: «The results show that Swiss CFOs are very much interested in an immediate and viable solution at the political level. However, rash decisions and interim solutions should be explicitly avoided. Rather, a comprehensive solution should be developed, which is well balanced and backed by the majority of stakeholders.»