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Switzerland is no tax haven but may be a 'tax paradise'?

René Zulauf and Manuel Angehrn of Deloitte Switzerland discuss why Switzerland can never really be described as a tax haven.

US president Joe Biden labelled Switzerland as a tax haven in his state of the union address, comparable to Bermuda and the Cayman Islands. Switzerland has never really truthfully been called a tax haven in the past, much less so since Switzerland phased out its special corporate tax regimes in 2019 and has been fully compliant with international tax standards ever since.

Contrary to tendencies observed on a global level, in particular in the EU and the US, Switzerland, while amending its tax legislation to meet international standards, kept it sane and simple, adding additional benefits, such as R&D incentives. Switzerland approached the challenges of COVID-19 with comparatively limited restrictions of business activity and individual freedoms. 

What is more, the Swiss government responded with a legislative package in an attempt to decrease the tax and regulatory burden for businesses in the future and to provide incentives for various industries. Among others, the Swiss parliament currently discusses the abolishment of Swiss withholding tax on bond interest and the abolishment of the securities transfer tax to further bolster financing operations in Switzerland and the financial industry. 

On the incentive side, the introduction of a tonnage tax for the shipping industry is in discussion (It may be little known that Switzerland, although small and landlocked, has a sizeable shipping industry). 

As another example, the canton of Zug, which has already one of the lowest tax rates among Swiss cantons, will reduce the tax rate due to COVID-19 temporarily further in years 2021–23 to mitigate the economic impact of the pandemic for taxpayers. This reduces the corporate headline tax rate in the city of Zug for instance to only 11.79% (effective combined federal/cantonal/communal rate) in these years.

The business-friendly attitude of Swiss government and of Swiss authorities is among others a consequence of direct democracy. The fact that Swiss citizens can essentially vote on legislative changes, either directly or via a referendum, keeps government in check and ensures that the government is actually there for the people and not vice versa. 

Equally, a healthy tax competition between the cantons, which are free to set their own tax rates, ensures competitive tax rates and a friendly treatment of taxpayers. In Switzerland, taxpayers are generally appreciated as business partners, rather than seen as mere taxable subjects.  

Admittedly, Switzerland needs competitive tax rates to compensate for the otherwise high cost of doing business. But then, paradise is never cheap.

René Zulauf
Partner, Deloitte Switzerland


Manuel Angehrn
Senior Manager, Deloitte Switzerland

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