In particular, the canton of Zug is speaking out. In advertising for international corporations, he is losing attractiveness due to the OECD minimum tax. So far, the companies established here have only had to pay approximately half of what is required in other cantons in terms of taxes. The local tax burden is well below the OECD minimum tax.
The canton should benefit from additional revenues intended to compensate for the OECD’s action. But Zug—and also Basel City, which is supposed to receive the most money after Zug—are not allowed to keep all the money. According to the motion for a vote, one quarter goes to the federal government and three quarters remain in the cantons. The two cantons are already considering how to maintain their attractiveness. A further tax reduction is also in question.
The Zug Case
According to NZZ, the financial director of the canton of Zurich and, at the same time, the government council, Ernst Stocker, issued a clear warning against possible tax reduction plans by Zug during a media appearance. The debate in the Federal Parliament on the OECD proposal has shown that the majority does not want the differences in tax competition to be even greater. “I am convinced that this will give a return on the financial settlement,” said Stocker.
If Zug became even more fiscally attractive for top earners, the large canton of Zurich could lose. However, tax competition can lead to sad experiences: In Schwyz, the canton with the second-highest financial power after Zug, certain dividends have been temporarily taxed so low over the last decade that they have become a losing business. The canton attracted more investment but had to pay more to the National Financial Compensation Authority (NFA) than it received. According to an expert opinion, Schwyz has also lost more money on the NFA than on additional taxes.
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Possible Scenarios
There are several ways to solve the tax riddle. One option is to shift tax policy from companies to households. In this specific case, the cantons could use the additional revenues of the groups to reduce taxes in other ways for high incomes. Another option is being discussed, following the example of other OECD countries: the payment of subsidies to companies is used to promote research and innovation or investment in environmental protection. One issue is higher expenditures on childcare or international schools.
In the canton of Lucerne, the government explicitly wants to relieve companies, among other things, of the capital tax and income from patents due to the minimum tax. But here too, the whole of the income from the minimum tax should not flow into tax cuts.
The canton of Neuenburg is an interesting tax case. For individuals, it is not affordable, but companies find it relatively attractive. Larger international corporations also have their headquarters here. After the implementation of the OECD minimum tax, Neuchâtel is expected to be among the cantons with the highest surplus income. However, it has recently been decided on an autonomous basis to raise corporate taxes. The tax rate depends on the amount of profit. Specifically, this means that for large companies, the burden should meet the requirements of the OECD as precisely as possible. At the same time, it aims to prevent small or purely domestic companies that are not covered by the OECD rules from having to pay more.
