Corporate Tax Reform III: Common Interests of Basel-Stadt and Basel-Landschaft

State councillor Dr. Eva Herzog (BS) and President of the Government Dr. Anton Lauber (BL) presented their conclusions about the message from the Federal Council concerning corporate tax reform III, on 18th August 2015.

Basel-Stadt and Basel-Landschaft are both greatly affected by the reform. Both Cantons aspire to taxation that keeps the economic area attractive for new and existing businesses and that, at the same time, is financially supportable for the Cantons and local authorities.

On 5th October 2015, OECD presented its recommendations regarding corporate taxes. The new international standards are gradually becoming clearer. They entail numerous states having to adjust their bases for taxing businesses. Switzerland will also have to abolish its special models that are no longer accepted internationally. The Federal Council acted with foresight and sent a message about corporate tax reform III to the Federal Parliament on 5th June 2015.

Common interests of Basel-Stadt and Basel-Landschaft

In a joint paper at the Beider Basel Chamber of Commerce, State Councillor Dr. Eva Herzog (BS) and President of the Government Dr. Anton Lauber (BL) presented their conclusions: both Basel-Stadt and Basel-Landschaft have been greatly affected by the reform. In the Basel regional alone, more than 30,000 people work in the international companies affected. Both officials judged their central concerns to be the same: together, they are speaking in favour of taxation that retains the attractiveness of the economic hub and does not put its jobs at risk. The reform should also be financially supportable for the Cantons and their local authorities.

Patent box and input support for innovative businesses

A patent box that is binding for all of the Cantons is being introduced with the reform: returns from patents and comparable rights that are the result of research and development in Switzerland are taxed at a reduced rate. The Cantons also have the opportunity to plan increased deductions for research and development applications (“input support”). They can also introduce targeted relief for tax on capital. These measures are in line with the international standards of OECD.

The importance of certainty for investors

In the message, the Federal Council acknowledged the importance of companies creating certainty for investors. As things stand now, current Swiss special models should be abolished in around 2019. However, the companies affected can use transitional measures for five years when a tax status is abolished, which will soften the blow of the transition from the old into the new tax system. The ability to plan and investment security for the company are also very important for the government.

Sustainable restructuring of the taxation system

The aim of the government of the Canton of Basel-Stadt is for the effective tax burden of the companies affected by the reorganisation to remain similar on the whole to today. Income and attractiveness should remain balanced. To this end, the Canton of Basel-Stadt will also start reducing the ordinary rate of tax on profits. The Federal Council’s message provides for reciprocal financing in the form of compensation of the Canton by the Confederation and an increase in taxation of dividends.