On 1 June 2017, the steering body consisting of the Confederation and the cantons approved its recommendations for a balanced tax proposal 17 (formerly Corporate Tax Reform III) for submission to the Federal Council.
In accordance with a press release issued by the Federal Council on 1 June 2017, the steering committee has adopted its central recommendations on the key content of tax proposal 17 (SV17).
Following the rejection of Corporate Tax Reform III (USR III) in the referendum of 12 February 2017, the Federal Council launched a new reform entitled "Tax Bill 17". The steering committee, headed by the head of the Federal Department of Finance (FDF), Federal Councillor Ueli Maurer, was entrusted with the task of drawing up reform proposals for the attention of the Federal Council and evaluating the proposals that were submitted in the course of hearings (see our contribution of 2 March 2017).
In order to draft SV17, consultations were then held with the political parties and the business and employee associations. In addition, representatives of the cities and municipalities took part in one of the five meetings of the steering committee. All participants welcomed the direction of SV17 and the three objectives pursued:
- Securing the attractiveness of the location
- International acceptance
- Productivity of tax income
According to the press release, the new special tax regulations are to be designed rather restrictively within the framework of these objectives and greater weight is to be attached to the interests of the cities and municipalities.
The steering committee recommends that the Federal Council include the following core elements in the bill:
- Repeal of the regulations for cantonal status companies.
- Patentbox: mandatory introduction in accordance with OECD standard at cantonal level.
- Deductions for research and development (R&D): optional introduction of an additional deduction for R&D expenditure at cantonal level. The deduction may not exceed the actual costs by more than 50% and should be limited to personnel expenses.
- Introduction of a mandatory relief limit: the tax relief on profits through the two instruments described above may not exceed 70%. This leads to a limitation of the scope for relief compared to the Corporate Tax Reform III, which provided for a maximum relief of 80%.
- Partial taxation of dividends: the partial taxation of dividends from qualified participations amounting to at least 10% of the capital should be 70% at federal level and at least 70% at cantonal and municipal level.
- Vertical equalisation (cantonal share of direct federal tax): the cantons' share of direct federal tax revenue will now be 21.2% instead of 17%. In addition, a clause is to be included to take account of the municipalities in connection with the increase in the cantonal share of direct federal tax.
- Child allowances: The minimum level of child and education allowances is to be increased by 30 francs. Child allowances will thus rise to at least 230 francs. The training allowance will now be at least 280 francs.
According to the media release, the Federal Council will already decide on the key parameters of SV17 in the course of June 2017. The Federal Department of Finance (FDF) will then prepare a consultation draft. The consultation process should be completed by December 2017. The adoption of the message for the attention of parliament is then planned for spring 2018.
In order to increase the transparency of the proposal, the cantons should publish their plans for cantonal implementation by the time the SV17 decision is made. In addition, the steering committee recommends that the cantons press ahead with their cantonal implementation projects in parallel with the federal bill, which forces the cantons to shorten their usual legislative deadlines. However, the steering committee considers this procedure to be necessary due to the urgency of the submission.
The central recommendations of the steering committee regarding the key content of SV17 are available here. See also the NZZ contribution of 1 June 2017.
