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Will Swiss vote against tax reform threaten it's competitiveness?

​Switzerland has voted to stop its government from reforming the corporate taxation system, which some are concerned may affect the country's competitiveness.

The reforms would have brought the nation in line with international standards, and abolished special treatment for multinational companies. However, its recent referendum saw the public reject these changes, with 59.1 per cent of the vote.

Switzerland’s Finance Minister Ueli Maurer has said it means that the country will no longer meet its pledge to get rid of special privileges by 2019.

The defeat, by a significantly larger margin than opinion polls had suggested, could be a big hit to business lobbyists in Switzerland, while important trading partners could also act against the decision.

Mr Maurer and other financial experts are worried that the rejection of corporate tax reforms will mean that companies will no longer look favourably on Switzerland. The move makes the business landscape in the country unclear, and firms may be uneasy about investing in Switzerland in favour of  countries that are more fixed on business taxes.  How the government will compensate for the rejection of its reforms is unclear and, as it could be detrimental for some, firms may instead chose to withdraw from the Swiss market.

The referendum was triggered after the country came under great pressure from other nations to get rid of its special tax breaks for multinationals, which make it a haven for many large companies.

Switzerland could reduce tax rates for firms across the board, but the public may be concerned that this would strain the country's finances and increase the burden on taxpayers. The vote now puts one of the world's most affluent countries in a delicate position, as immigration quotas are already straining its relationship with the EU.

‘There’s the danger that Switzerland disappears somewhat from the radar of international companies’, Mr Maurer told the press after the vote result was announced. He added that the shortfalls in tax revenue were a real danger and there was the risk of jobs being moved away from Switzerland.

It's now up to the Swiss government to come up with a new way to keep the country competitive, but make sure it still meets international standards. This process could take years and, in the meantime, other countries may change their tax policies to ensure they are a competitive place to do business.

The UK has recently announced a corporation tax cut to take it down to 19 per cent, while President Trump proposed reducing the business levy from 35 per cent to just 15 per cent. In this climate, Switzerland must come up with an attractive corporation tax system quickly – one that doesn't significantly favour multinationals – if it wants to give companies stability for the future.