When the EU put pressure on Switzerland to scrap tax breaks for foreign companies, Geneva had the most to lose. Now the canton that is home to almost 1,000 multinationals is set to use tax to burnish its appeal.
Geneva will on August 30 propose cutting its corporate tax rate to 13.49% from 24.2%, according to three people with knowledge of the matter. For an interim period of five years, the rate would be a slightly higher 13.79%, said the sources, who asked not be named as the matter had not been made public, Bloomberg reported.
While that is 2.2 percentage points higher than the average preferential rate offered to many foreign firms, the new regime will improve the Swiss city’s competitive position, according to Credit Suisse Group.
“I could see Geneva going up very high in the ranks,” said Thierry Boitelle, a lawyer at Bonnard Lawson in the city. “International companies will be glad to have some certainty when the new rate is finally implemented.”
Like the rest of Switzerland, Geneva has been buffeted by the strong Swiss franc and concern over immigration quotas, while the demise of banking secrecy has hurt the city’s financial industry. The stakes are high for the politicians contemplating a tax rate to underpin the French-speaking canton’s allure: multinationals from Procter & Gamble to commodity trader Mercuria Energy Group account for 76,000 jobs and 40% of the economy.
“It’s the mother of all battles for us,” said Vincent Subilia, deputy director of international affairs and arbitration at the Geneva Chamber of Commerce, Industry and Services. “We can’t afford to lose it, because the attractiveness of Geneva and the shape that our economy will take for generations to come are at risk here.”
With a rate of about 13% Geneva would jump 13 places to become the third most attractive of Switzerland’s 26 cantons, trailing only Zug and Zurich, according to a study by Credit Suisse.
“Geneva and the western part of Switzerland will be even more attractive for firms, especially compared to France,” said Thomas Ruehl, head of regional research at Credit Suisse. “We see the corporate tax reform as a big opportunity for Geneva.”
France, which borders the canton to the south, east and west, has a tax rate of 33.33%, according to figures published by KPMG. In Europe, Geneva’s rate would exceed only Ireland’s 12.5% and Montenegro, which has the region’s lowest rate of 9%. Boitelle said that meant Geneva would compete with Ireland, the Netherlands and the UK as a low-tax jurisdiction, while it might also provide Zurich with stiffer competition for Swiss corporates.
