15% Corporate Tax Rate Neutralized?…Switzerland Considers Post-Tax Subsidy Payment Plan

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Switzerland is reportedly considering a plan to accept the 15% minimum corporate tax rate agreed upon at the Group of Seven (G7) finance ministers' meeting, while compensating companies for the increased tax burden through subsidies and other methods, according to major foreign media on the 10th (local time). Foreign media interpreted this as Switzerland attempting to undermine the G7 finance ministers' agreement, illustrating how difficult it is to end the competition among countries to lower corporate taxes.

According to officials, the Swiss federal government has recently been consulting with cantonal governments on ways to reduce the increased corporate tax burden on companies through research subsidies, social security deductions, and tax credits.

Switzerland, a small country with a population of 8.5 million, has enjoyed economic growth by attracting global multinational corporations with its low corporate tax rates. Among Switzerland's 26 cantons, 18 have corporate tax rates below 15%. At the meeting held in London, UK, on the 4th and 5th, the G7 finance ministers agreed to set the global corporate tax rate at a minimum of 15%.

Economiesuisse, a Swiss business association, estimated that applying the 15% corporate tax would affect up to 250 companies and expressed concerns that it could lead to a weakening of Switzerland's competitiveness. Economiesuisse explained that many multinational companies in Switzerland originated there and create significant employment.

Accordingly, the Swiss federal government is considering accepting the 15% corporate tax rate while offsetting the cost burden on companies by providing other subsidies. Foreign media reported that multinational companies headquartered in Switzerland, such as the raw materials intermediary Glencore, would pay the 15% corporate tax to Switzerland but receive subsidies in return.

The corporate tax rate in Vaud, where Nestl?'s headquarters are located, is 14%. However, a Nestl? spokesperson stated that Nestl? pays corporate taxes in 150 countries worldwide, and the effective corporate tax rate it bears is 24%. He pointed out that the international tax system can only succeed with strong support from all countries and emphasized that the international tax system should not result in double taxation.