KPMG believes that the coronavirus crisis will strengthen the race for tax competitiveness. Some highly indebted countries will therefore have to fight to save their tax revenues.
Switzerland’s competitiveness in terms of taxation is good. Thanks to corporate tax reform, the rate fell last year, making the country well positioned in international comparison, according to a KPMG study released Wednesday.
On average, tax rates have decreased by about two percentage points from 17.1% to 15.1%. This fall is to be attributed to the reform on corporate taxation, explain the authors of the Swiss Tax Report 2020, which compares 130 countries, including Switzerland and its 26 cantons. The canton of Geneva thus lowered its rate from 24% to 14% and that of Friborg from 20% to 14% in the context of this reform.
In 2007, when KPMG launched the first edition of its study, the tax rate in Switzerland was around 20%, the audit firm said.
Low tax rates, however, are not enough to guarantee a country’s fiscal competitiveness over the long term, as other factors come into play, especially in the context of the OECD BEPS project. and G20. These new rules aim to fight tax evasion by taxing profits where they are generated.
For KPMG, this “paradigm shift” promises upheavals in taxation. “Originally focused on the digital sector, the project turned into a general overhaul of international rules for many industries,” said Stefan Kuhn, head of tax and legal advice for KPMG. In addition, the coronavirus crisis is likely to reinforce the race for fiscal competitiveness, some highly indebted countries should fight for their tax revenues.
Zug wins the palm
In Switzerland, the cantons of Central Switzerland and Inner Appenzell Rhodes continue to offer the lowest tax rates in the country. Profits are taxed at 11.9% in the canton of Zug and 12.3% in Lucerne, which finds itself relegated to second place. The canton of Glarus has also made a significant reduction in its taxation, now rising to ninth place among the most attractive cantons.
These cantons are well positioned in international comparison, competitive with Ireland, Lichtenstein and Cyprus, which have tax rates around 12.5%. They also do better than Hong Kong (16.5%) and Singapore (17%) but less well than Qatar (10%).
In contrast, Malta (35%), Germany (30%) and France (28%) are the countries with the heaviest corporate taxes in Europe.
For the coming years, a reduction in the tax rate is to be expected, insofar as some cantons have not yet fully implemented the reform. By 2025, tax cuts are expected in Basel-Country (-4.5%), Valais (-4.8%) and Ticino (-3.3%).