Swiss voters approve global minimum corporate tax, climate goals

GENEVA - Swiss voters voted on Sunday to introduce a global minimum tax on businesses and a climate law that aims to cut fossil fuel use and reach zero emissions by 2050, public broadcaster SRF reported.

The results showed 79 per cent of those who voted in Sunday’s national referendum backed raising the country’s business tax to the 15 per cent global minimum rate from the current average minimum of 11 per cent, while 59 per cent supported the climate law.

In 2021, Switzerland joined almost 140 countries that signed up to an Organisation for Economic Cooperation and Development (OECD) deal to set a minimum tax rate for big companies, a move aimed at limiting the practice of shifting profits to low tax countries.

Even with the increase, Switzerland will still have one of the lowest corporate tax levels in the world, and the proposal, estimated to bring 2.5 billion Swiss francs (S$3.75 billion) per year in additional revenue, has been backed by business groups, most political parties, and the general public.

The climate law, brought back in a modified form after it was rejected in 2021 as too costly, has stirred up more debate with those campaigning against it gaining traction in recent weeks.

Proponents say the law is the minimum the wealthy country needs to do to prove its commitment to fighting climate change while opponents from the right wing People’s Party say it will jeopardise energy security.

In Sunday’s referendum, voters also approved to extend some provisions of the country’s emergency Covid-19 law, required under Switzerland’s system of direct democracy, where legislation is put to the public vote.

Switzerland is home to the offices and headquarters of around 2,000 foreign companies, including Google as well as 200 Swiss multinationals, such as Nestle. While all would be affected, business groups have welcomed the greater degree of certainty that the new tax would bring, even if Switzerland lost some of its low-tax allure.

“No other country is going to have lower taxes either. We want the additional tax revenue to stay in the country, and be used to improve its attractiveness for businesses,” said Christian Frey, from Economiesuisse, a lobby group.

Climate-friendly alternatives

Switzerland imports around three-quarters of its energy, with all the oil and natural gas consumed coming from abroad.

Climate activists had initially wanted to push for a total ban on all oil and gas consumption in Switzerland by 2050.

But the government baulked at the so-called Glacier Initiative, drawing up a counter-proposal that scrapped the idea of a ban but included other elements.

The text promises financial support of 2 billion Swiss francs over a decade to promote the replacement of gas or oil heating systems with climate-friendly alternatives, as well as aid to push businesses towards green innovation.

Nearly all of Switzerland’s major parties support the Bill, except the SVP – the country’s largest party – which triggered the referendum against what it dismisses as the “electricity-wasting law”.

The SVP says the Bill’s goal of achieving climate neutrality in just over a quarter-century would effectively mean a fossil fuel ban, which it claims would threaten energy access and send household electricity bills soaring.

In 2021, the party successfully lobbied against a law that would have curbed greenhouse gas emissions, and there had been fears it might push through a similar upset.

But the “yes” camp was likely strengthened by swelling concerns around Switzerland’s reliance on foreign energy sources since Russia’s invasion of Ukraine threw into doubt Swiss access to much of the foreign energy it uses.

Corporate tax hike

There had, meanwhile, been little doubt that voters would back a separate referendum on hiking the tax rate for large businesses, with opinion polls consistently showing strong support.

The vote will allow an amendment to the Constitution so Switzerland can join an international agreement, led by the Organisation for Economic Cooperation and Development, to introduce a global minimum tax rate of 15 per cent for multinational corporations.

The plan is to impose the new rate on all Swiss-based companies with a turnover above €750 million (S$1.1 billion).

Until now, many of Switzerland’s 26 cantons have imposed some of the lowest corporate tax rates in the world, a move that they often said was needed to attract businesses in the face of high wages and location costs.

The Swiss government estimates that revenues from the supplementary tax would amount to between 1 billion and 2.5 billion Swiss francs in the first year alone. AFP, REUTERS