When it comes to tax and business, Switzerland remains competitive on the global tax stage, as confirmed by KPMG’s latest “Swiss Tax Report 2018” which compares corporate and income tax rates in 130 countries as well as all 26 cantons. No noteworthy shifts were identified in the Swiss tax landscape. The average regular corporate tax rate levied by Swiss cantons has declined by merely 3.05 percentage points since KPMG first began tracking these rates in 2007. The situation regarding individual tax rates is similar: Following a moderate downward trend which persisted until 2012, the average top income tax rate has settled at just below the 34% mark, but several fiscal reform endeavors in Switzerland and abroad are likely to shake up the tax competition situation in the near future.
US Tax Reform & Tax Proposal 17
As regulatory change is under way in many tax jurisdictions, usually it takes time for the full effects to unfold. Shifts can also be abrupt, however. Perhaps the highest profile example is the recent US tax reform, with its far-reaching implications for individual and corporate taxpayers. So far, initial speculation that the move could trigger a new “race to the bottom” for competitive tax rates among Swiss cantons appears unfounded. Indeed, the report shows that natural – viable – tax rate limits have been reached in many cases, and Switzerland’s own Tax Proposal 17 safeguards stability for the foreseeable future.
Digitalization in the tax landscape
Supranational regulations, such as BEPS and ATAD2, or even transnational agreements are increasingly part of the global tax landscape. Overall, ongoing global shifts have become the norm. Currently, digital megatrends are gathering speed, ready to drive the next phase of the tax landscape evolution. What does this mean for Switzerland?
As natural limits of corporate and VAT rates are reached, digitalization drives the next phase of the tax landscape evolution: