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Swiss Tax Vote Could Make Business Think Again: QuickTake Q&A

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Switzerland’s future as an attractive base for companies hangs in the balance. In a Feb. 12 referendum, Swiss voters will decide whether to accept or reject a government plan to replace the special tax breaks that multinational companies now enjoy. While a ‘Yes’ vote would ring in tax cuts, a ‘No’ vote would force officials to come up with a new plan to prevent companies from moving elsewhere and avoid eventually landing on a blacklist for non-compliance with Organization for Economic Cooperation and Development rules.

They’re trying not to. Switzerland has committed to scrapping the preferential tax rates it currently gives to thousands of multinationals (set up with the legal status of holding and domiciliary companies) because they aren’t in line with the OECD’s rules. The referendum is on whether to accept the government’s proposal for replacing the current system. It would introduce tax breaks for income from patents and for research and development activities. Multinationals are important to the Swiss economy: Companies with special status employ some 150,000 people and account for half the R&D spending. The federal government now now gets about half of its corporate earnings tax revenue from multinationals; cantons and municipalities get 20 percent.