The Swiss Committee for Economic Affairs and Taxes of the National Council (CEAT-N) has recommended that the popular initiative calling for an end to the flat tax regime currently benefiting wealthy foreigners in the Confederation be rejected. The Swiss Council of States had previously opposed the proposals on December 15, 2013.
The flat tax regime is beneficial for high income foreign individuals. The measure is intended to attract such foreign individuals to Switzerland and is regarded as benefiting the economy. The measure does however mean a loss of tax revenue that would otherwise be earned if a progressive tax rate were to be imposed on these individuals.
The CEAT-N committee has argued that the flat tax regime strengthens the attractiveness of Switzerland as an economic location for wealthy and internationally mobile households. Their residence in the Confederation has many positive effects, including job creation and preservation. Furthermore, these high income tax-paying individuals often act as patrons in the cultural sphere and sporting arena, thereby boosting tourism, which is of particular importance for outlying regions.
The majority of the committee therefore concluded that these reasons justify non-adherence to the principle of “horizontal tax equity.” In contrast, the minority underlined the greater need to ensure tax equity, warning that any inequality in tax treatment constitutes a violation of the constitution, with negative effects on “tax morality.”
The Swiss National Council is due to vote on the popular initiative shortly.
