On 19 May 2019, the Swiss public will vote on the Federal Act on Tax Reform and AHV Financing (TRAF). By 17 January 2019, various referendum committees have submitted more than the necessary 50,000 signatures against the law. At the same time, the implementation process is also progressing at cantonal level: while some cantons are about to hold referendums, governments in other cantons have not yet sent a bill to parliament.
The tax reform, which Parliament has linked to a social compensation measure concerning AHV financing, provides in particular for the abolition of internationally no longer accepted tax regimes with transitional measures and the introduction of replacement measures. However, these measures have met with rejection in certain political camps. In addition, the combination with additional AHV financing has mobilized further opponents. With the signatures submitted, the event of a public vote gets unavoidable.
On 19 May 2019, a public vote will be taken on an amendment to the federal laws (in particular the Tax Harmonization Act). The review of the submitted referendum signatures is still pending and will presumably be published in the SHAB (Swiss Official Gazette of Commerce) at the end of January, however the necessary signatures are considered to have been obtained.
Important: The effective implementation of the tax reform only takes place at the cantonal level, in the cantonal tax laws. This applies in particular to the cantonal tax rate reductions, which are also part of the reform strategy but are not formally part of the federal bill.
The canton of Vaud has created premature clarity regarding the general reduction in the tax rate: a lower cantonal tax rate is already in force at Lac Léman as from 1 January 2019.
The canton of Basel Stadt also plans to proceed rapidly: Parliament has already approved the implementation of the reform, including a reduction in the tax rate. However, because the referendum was held against it, a referendum vote is necessary on 10 February 2019. If approved, the government council potentially could bring the tax rate reduction into effect already retroactively to the beginning of 2019.
A referendum vote was already held in Berne at the end of 2018, although the reform itself was not yet to be implemented, but a first step towards reducing the profit tax rate. The public’s rejection of this proposal shows that the implementation of the planned tax rate cuts – at least in some cantons – will not be as simple.
In Zurich, the government council referred its implementation proposal to the cantonal parliament in autumn 2018, which is to discuss it in spring 2019. If a referendum is held against the cantonal proposal, it is to be voted on in September 2019. In this case, too, the entry into force is planned for 2020.
Last autumn, the cantonal government of Zug also referred its proposal to amend the tax law to the cantonal parliament. The latter is to discuss the amendment in a first reading in April 2019 and in a second reading after the national vote in May 2019.
Other cantons such as Schaffhausen or Ticino, have not yet sent an official bill to the cantonal parliament. The corresponding intentions of the implementation parameters are, however, known.
In case of a Public’s Yes on 19 May 2019, it is planned that the reform will come into force on 1 January 2020. The regulation concerning a temporary special tax rate solution is to come into force immediately after the referendum vote. The cantons will thus be able to make use of this measure early in order to mitigate the de facto tax increase for those companies that plan to waive their cantonal tax status earlier in time.
In the event of rejection, the Federal Council would have to act quickly and ensure that the tax regimes criticized by the OECD and the EU are abolished – potentially together with increasing the cantonal share of federal tax revenue and adjusting the fiscal equalization system. Otherwise it would hardly be possible to prevent Switzerland from being blacklisted by the EU.