June 1, 2017 / 10:45 AM / 6 months ago

Dividend taxes, child allowance feature in Swiss tax reform draft

ZURICH (Reuters) - Higher dividend taxes and child allowances feature in Switzerland’s latest crack at tax reform after voters in February rejected the government’s approach to eliminating ultra-low tax rates for thousands of multinational companies.

A Swiss flag is pictured in front of the Federal Palace (Bundeshaus) is pictured in Bern, Switzerland, January 16, 2017. REUTERS/Denis Balibouse

Most Swiss recognise the country needs reform to avoid being blacklisted as a low-tax pariah, but proposals to help companies offset the loss of special status breaks created deep divisions that led to the first package’s defeat.

A revised draft blueprint unveiled by federal and cantonal officials on Thursday sought to address criticism of the original plan and secure political backing for the new policy facing international scrutiny from other rich countries.

“We think we have an overall package that can reach consensus,” Finance Minister Uli Maurer told reporters in Bern. If backed by federal, state and local governments, it could clear parliament by September 2018 and take effect in 2019, he said.

But the law could still face a challenge if opponents force another referendum under the Swiss system of direct democracy.

The proposals include changes in how dividends are taxed.

For investors who own more than 10 percent of a company, 70 percent of their dividends would be subject to federal tax, up from 60 percent now. Cantons would also tax at least 70 percent of these dividends, up from 40-70 percent now.

The minimum amount for child and education allowances would rise by 30 Swiss francs (£24.1) per month so that parents get 230 francs for each school-aged child and 280 francs for children at university.

The European Commission, which is in the process of drawing up a blacklist of uncooperative tax regimes, has said it was “very disappointed” with the referendum result in February.

The vote was also a setback for Swiss promises to meet international standards and end by 2019 special low tax rates that benefit about 24,000 companies. The challenge is to phase out tax breaks without triggering a mass exodus.

For a summary of the draft proposals see: here

Reporting by Michael Shields and John Revill; Editing by Stephen Powell

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