In the past, Switzerland has established itself as an internationally preferred location for multinational companies and today counts among the most strongly integrated political economies within the global economy. This means that Switzerland is on the winning side of globalization.
This development has provided our country with exceptional prosperity. Despite global networking, Switzerland was surprisingly also able to master the economic challenges caused by the financial crisis and the strong Swiss Franc.
However, over the last few years the effects of globalization have also been critically questioned and the community of states agreed to fight undesired effects of a globalized economy. Those projects, for which tax planning of globally active companies was scrutinized, were of particular importance for Switzerland. Based on the examinations, the OECD, together with the G20 countries, developed measures with the aim of restricting tax planning of multinational companies. Today these are known as BEPS measures (measures to counter Base Erosion and Profit Shifting). They obligate the member states of the OECD, including Switzerland, to adapt certain tax regulations. At the same time BEPS leads to a new transparency between the states with regard to fiscal treatment for taxpayers.
But even in Switzerland itself the effects of the increasingly stronger global networking were under scrutiny and culminated in the acceptance of the mass immigration initiative, which compels politics to readjust the regulations for immigration into our country.
For Switzerland, this means a departure from framework conditions which had represented a significant portion of success over the last years and decades.
As a result of this development, our country is undergoing fundamental changes and has to redefine its role and its position within the community of States. Even if there is a fierce discussion with regard to the design of the new framework conditions in politics and economy, all political camps agree on the strategic goal of the new framework conditions.
In its message on the Corporate Tax Reforms III, the Federal Council stated:
[…] safeguarding a continued competitive corporate tax burden, the restoration of international acceptance of central characteristics of the Swiss corporate tax regulation as well as securing the financial yield of income tax for the federal government, cantons and municipalities.
The Corporate Tax Reform III (CTR III), which mainly aimed to establish an international acceptance of the tax framework, has been rejected by the Swiss people on 12 February 2017. Switzerland was obligated to develop a new bill regarding the reform of the corporate tax law, which is better suited to the needs of the Swiss people - the Steuervorlage 17 / TRAF.
But none of the concerned parties is disputing that Switzerland wants to and will continue to be an attractive location for international corporations.
The following details show why Switzerlad - in spite of change - is still the perfect tax location country:
Reason 1: Switzerland's position in global competition
In addition to democracy and rule of law, Switzerland is continuously praised for its political and economic stability. This is due to the fact that the federal system creates good conditions in which national decisions are made through consensus and concordance.
This liberal economy particularly supports competitiveness. Accordingly, in a WEF study, Switzerland ranks for the tenth time in a row as the most competitive country in the world.
The fact that Switzerland is not a member of the EU and EEA gives the country extensive scope when designing framework conditions. There is extensive leeway especially in the legal field, i.e. tax law, company law, labour law or social insurance law but also with regard to the regulation of capital markets as well as in the environmental sector. This means that in the past the location conditions could be autonomously adjusted to the requirements of globally active companies. And so, from the companies’ point of view, Switzerland can positively distinguish itself from the regulations applicable in the EU’s internal market.
Reason 2: The location and internationality
Geographically, Switzerland is in the centre of Europe. The Swiss economy is closely connected with its neighbouring countries such as Germany or France, which are among the most important pillars in the EU. The Confederation is therefore an important trading partner to the EU. The high number of multinational companies established in Switzerland proves that Switzerland is a unique location for internationally orientated activities. With its numerous SMEs, the Swiss industry is highly geared for mass export. The high number of multinational corporations established in Switzerland combined with the strong export-orientated domestic economy creates a climate of internationality and cosmopolitanism. This permits the recruitment of competent, well trained and linguistically skilled employees.
Reason 3: Legal certainty
In general, one of the most important factors in choosing a location is legal certainty. Not only domiciled companies but also multinational corporations trust the continuity of regulatory framework conditions. Legal certainty is a valuable commodity which has been developed and maintained by society over decades. Based on the political culture and the practiced concordance at all political levels, this will not change in the future.
Reason 4: Research, development and innovation
Today, international companies are focusing more and more on research and development activities. Switzerland currently heads the list of the world's most innovative countries. This is primarily due to its successful industry, the protection of intellectual property, the diversified and circumspect education policy as well as internationally recognised research centres. This innovativeness is primarily due to the collaboration between companies, research institutions and universities that creates an interactive catalytic effect. Ultimately, Switzerland’s tried and tested innovation policy and the research funding fall on fertile ground. In this regard, Switzerland is not only the leader when it comes to the number of Europe-wide protected patents but also in citations in journals.
Reason 5: Tax framework conditions
Experience has shown that the factor «tax environment» is a central criterion for any company choosing a location. A competitive tax system is an important condition for location selection. Switzerland’s tax model is considered to be quite competitive and at the same time marked by being flexible and federalist. With a tax burden on profits ranging between 12% and 15%, the cantons of Nidwalden, Lucerne, Zug, Obwalden and Appenzell-Ausserrhoden are considered to be particularly attractive for international companies.
Even if Switzerland needs to give up individual elements (e.g. abolish the special regime for holding companies, mixed companies and principal companies; finance branch) of the previous tax attractiveness and has to replace these with new regulations as part of the Steuervorlage 17 / TRAF, it should not be ignored that, in international comparison, the general tax burden and the generally applicable tax regulations in conjunction with the open and transparent conversation culture between the taxpayer and tax authorities, represents an extremely attractive combination of advantages.
Reason 6: First-class infrastructure
In addition to the optimal tax conditions, the existing infrastructure proves to be Switzerland’s great advantage. The traffic infrastructure and education infrastructure, as main pillars of a governmental infrastructure, are exemplary. Swiss punctuality is legendary.
Besides these important fundamental pillars of traffic and education, all other elements for a well-functioning state system are ideal in every way. This includes, among other things, the range of leisure and cultural activities, security, health facilities and the diversity of languages.
Switzerland is not considered as an immigration country in the classic sense. But, in the truest sense, Switzerland can be described as a location country. The endeavours and interests of both commerce and industry as well as politics are geared towards creating an awareness that Switzerland is an attractive location for economic activities. The federal government maintains an active and global business development. De facto, every canton has its own regional business development, which supports interested companies and private individuals in the establishing process to the best possible extent. In the consulting industry, the location business accounts for an important market sector. Federal government and cantons organize events and presentations all over the world in order to show our country in the best possible light. Switzerland can measure against its competitors in Europe and Asia in the education and research sector, legislation and tax law and regularly occupies the top positions in attractiveness rankings. The universities and in particular the Federal Institute of Technology (ETH) are among the best educational institutions in the world.
As a small country, Switzerland is accustomed to and practiced in asserting and proving itself in international competition through performance and perseverance. Flexibility and searching for the best solutions are anchored as a social drive in the consciousness of the population. In the current difficult environment, it is this flexibility and focusing on good solutions that form the basis for good and future-orientated solutions. Switzerland wants to and will continue to be an attractive location.