Switzerland, home to numerous multinational corporate headquarters, has given its backing to a global overhaul of company taxation rules that aims to stop profits being unfairly sucked into low tax jurisdictions.
Swiss cantons have dismissed the idea that the proposed regulations could make them less attractive venues for foreign firms. But some observers feel the proposals do not go far enough to make a real difference or that they will be too difficult to implement.
The corporate tax crackdown was drawn up by the Organisation for Economic Co-operation and Development (OECD) and adopted by a G20 meeting of finance ministers in Moscow on Friday. Switzerland was represented for the first time at such a meeting by Finance Minister Eveline Widmer-Schlumpf and Swiss National Bank head Thomas Jordan.
«Switzerland is committed to the principle of fair tax practices between countries,» the Swiss Secretariat for International Financial Matters said in a statement. «We welcome initiatives which develop this principle further and enhance the integrity of the tax system.»
The statement added that it would be vital to implement the tax changes in all countries, creating a level playing field globally.
The OECD initiative was drawn up in response to public outrage at current rules that allow multinational firms to legally divert profits to countries with lower tax rates. Corporate giants such as Starbucks and Amazon have faced fierce criticism for conducting such practices, as have the countries that allow this to happen.
«Unethical manipulation»
Switzerland has for decades built up a reputation as a tax haven for multinationals, attracting regional headquarters and administrative back-offices of many corporate brand names. While not alone in promoting itself as a paradise for companies, the tax policies that Switzerland employs have been increasingly criticised in recent years.
«Why should Switzerland set out to attract companies based on the unethical manipulation of laws to bleed taxes away from other countries?» Florian Wettstein, professor of business ethics at the University of St Gallen, told swissinfo.ch.
«What companies are doing is in most cases perfectly legal, but from an ethical point of view it is inherently problematic.»
But Wettstein is unconvinced that the OECD proposals would be enough to stamp out the current tax practices.
Campaigning group Tax Justice Network (TJN) agreed with the pessimistic prognosis, saying the «approach is like trying to plug holes in a sieve».
«The OECD has chosen a road that is strewn with obstacles and leads in the wrong direction,» TJN said in a statement.
Underwhelmed
Economic development agencies that work on behalf of Swiss cantons to reel in foreign firms were underwhelmed by the news of a corporate tax overhaul despite Switzerland’s tax regime being a potent lure for multinationals.
«It would be a positive development to have a clear, level playing field where everyone has to play by the same rules. At the moment every country applies its own tax particularities; the system is very complicated and this creates many distortions,» Philippe Monnier, executive director at the Greater Geneva Berne Area agency (GGBa), told swissinfo.ch.
«But it could be extremely hard to implement the OECD guidelines in a fast, efficient way. Because of this, we do not see any short-term impact, but in the long term it could be beneficial to everybody – but only if the implementation is fair and global.»
Both GGBa and the Greater Zurich Area development agency played down the role of taxes in company relocations, stressing instead Switzerland’s stable political and economic regime, a strong currency, excellent transport and educational infrastructure and highly qualified workers.
International standard
The G20 meeting of finance ministers and central bankers in Moscow on July 18-19 also discussed other proposed measures to boost global economic growth, including plans to introduce an international standard for automatically exchanging tax information.
Such a system, intended to block tax cheats, has been demanded from many countries for some years but until recently resisted by Switzerland.
But since last month, Switzerland has said it would support automatic information exchange, but only if it is applied equally to all countries and it is specified exactly what information would be included in the exchange.