Employer’s unions and business associations in Switzerland have wholeheartedly welcomed the rejection by the Swiss voters and cantons of the fiscal initiative put forward by the Social Democrat Party (SP), aiming to impose a minimum tax on the Confederation’s wealthiest.

The proposal ‘For fair taxes’ (Pour des impôts équitables) sought to introduce a minimum income tax rate of 22% for single individuals earning more than CHF250,000 (EUR187,000), and to introduce a 0.5% levy on taxable wealth in excess of CHF2m in a bid to put an end to tax competition between the Swiss cantons, eager to attract successful entrepreneurs and wealthy residents.

Yet it is this very tax competition, the business unions and associations argue, which forms the backbone of the Swiss economy, key to the Confederation’s success as a location, and beneficial to all.

According to Economiesuisse, the largest umbrella organization representing businesses in Switzerland, the Socialist initiative would have proven extremely damaging to Switzerland as an economic location.

Economiesuisse maintains that the proposal would have severely shaken the successful federalist system, which marries cantonal autonomy with effective tax competition, creating an attractive environment in which to live and do business. The organization argues that the initiative would have led to a rise in taxation in the towns and cantons, and would have compelled the cantons to relinquish key fiscal powers to the Confederation, rendering them powerless to reduce their tax rates below defined thresholds in order to attract individuals and businesses to locate there.

Inter-cantonal tax competition is, Economiesuisse underlines, beneficial to the country as a whole as it compels the state to use public money parsimoniously and to constantly optimise its price-performance ratio, serving in turn to further strengthen Switzerland’s economic location.

A recent study presented by the business body argued that tax competition not only benefits the rich and large businesses in Switzerland, but the whole country, and posited that tax harmonization would have resulted in tax rises.

In a recent statement, the Swiss employers union, l’Union Patronale Suisse, noted that the conditions necessary for ensuring an attractive fiscal climate have been preserved by the rejection of the proposed wealth tax, underlining the fact that the initiative would have virtually stifled any possibility of tax competition. The employers union echoed the opinion that the combination of tax competition, financial balance and public spending discipline are a major factor in Switzerland’s political success.

The Swiss Union of Arts and Trade, Usam, also welcomed the clear rejection of the socialist initiative, arguing that the measures would have been harmful to both small- and medium-sized enterprises (SMEs) and to arts and commerce.

Underlining the importance of preserving the values of federalism and fiscal competition, Usam maintains that these values contribute greatly to the successful Swiss model and therefore to the prosperity of the country.

Usam points out that the rejection of the initiative is of particular importance to SMEs, as the proposals would have unnecessarily deprived a good number of businesses of their strength, which would not only have penalized the success and motivation of the middle classes, but would also have considerably weakened the Swiss economy in the global market.

The Socialist Party are adamant, however, that the result is a missed opportunity to re-establish fiscal justice. Given the large proportion of the ‘yes’ vote, the SP has announced that the debate is far from closed. It now aims to continue its work towards a 'fairer' tax system.

According to the final results of the vote held on November 28, 58.5% of the electorate voted against the SP’s initiative while 41.5% voted in favour.

Although 1.07 million voters supported the view that tax competition among the Swiss cantons should be limited, 1.51 million voters agreed with the Federal Council and business associations, and opposed the measure.