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Will the Global Minimum Tax Make Switzerland Less Attractive to MNEs?

10th May 2022

tp in 5 social image with photo of switzerland

Switzerland’s cantons have long been known for attractive corporate tax rates—the Canton of Zug is among the lowest at 11.9%—which is why implementing a global minimum tax, or as it’s known around the OECD, Pillar Two, poses challenges. Switzerland is home to 18 cantons below Pillar Two’s 15% global minimum tax rate and if they fail to raise their rates to 15%, companies could end up paying the difference to other countries. According to the federal government, that means Switzerland could miss out on CHF 1 to 2.5 billion (Swiss francs) in tax revenue. Not an ideal situation to be in after a pandemic. The OECD’s timetable is another problem and Switzerland is trying to put the brakes on it by delaying Pillar Two’s rollout. The OECD and G20 nations aim to launch elements of Pillar Two by January 1, 2023—which is right around the corner—but Switzerland’s Federal Council plans to implement the minimum tax by a constitutional amendment and will enact a temporary ordinance ensuring that the minimum tax can be rolled out on January 1, 2024. A vote on June 23, 2023, will determine how that plays out, but either way, one thing is very clear: If the global minimum tax takes effect, countries like Switzerland will have to offer companies advantages that go far beyond low tax rates.