Swiss propose corporate tax reforms after EU pressure

Fri May 17, 2013 10:29am EDT
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By Caroline Copley

BERNE (Reuters) - Switzerland outlined plans on Friday to reform the way it taxes companies as it seeks to counter criticism from Brussels while trying to remain attractive to the many multinationals based in the country.

The Swiss have lured thousands of foreign companies including online retailer eBay (EBAY.O: Quote) and trading giant Glencore (GLEN.L: Quote) by taxing foreign profits at a lower rate than domestic earnings, a practice known as "ring fencing".

But the European Union says such tax breaks amount to "unauthorized state aid" and has given Switzerland a June 21 deadline to come up with alternatives if it wants to avoid sanctions.

Initial proposals made by a steering committee on Friday broadly recommended abandoning the ring-fencing practice as it has been conducted previously, in part by reducing standard corporate tax rates and introducing other kinds of tax breaks used in EU states.

The recommendations will now be the basis for consultations with the country's 26 fiercely independent Canton regional governments, who compete to attract companies resulting in current corporate tax rates ranging from 12 to 24 percent.

"We want to remain competitive," Finance Minister Eveline Widmer-Schlumpf told a news conference. "We have an interest to keep these mobile companies in Switzerland."

Firms with special tax status contributed about half of Switzerland's total corporate tax revenues of 8 billion Swiss francs ($8.34 billion), Widmer-Schlumpf said.

The proposals include using so-called license boxes to allow income from intellectual property to be taxed at a lower rate. License boxes also known as a "patent boxes" are already used in EU countries including Britain, Belgium and Luxemburg.   Continued...

The logo of commodities trader Glencore is pictured in front of the company's headquarters in the Swiss town of Baar November 20, 2012. REUTERS/Arnd Wiegmann