Swiss tax policy prepares for phase two

To support businesses and workers facing forced closures linked to the pandemic, the Federal Council has so far allocated a package of aid worth around 65 billion francs which, thanks to its speed and effectiveness, has strongly contributed to stem the rise in unemployment. and corporate failures. However, with the reopening of activities, extraordinary aid such as the loan guarantee for companies (which absorbed 42 billion) or shortened working hours will gradually disappear. Several questions arise as to how the Confederation and Cantons should manage fiscal policy in the coming months. A virtual conference organised by SUPSI with various experts dealt with these issues. Public spending is in fact an important tool to revive the economy in times of crisis, and most economists are convinced that the recovery of 2021 will not be enough to cover this year's holes. On the other hand, the debt increase will have to be managed and compensated sooner or later.

Switzerland has ten years of growth behind it, with state accounts and an enviable public debt (around 32% of GDP - the EU average exceeds 80%).

So, in theory there is no shortage of room for further aid to the private sector. Doubts arise about the best ways to use. As pointed out by Christian Vitta, Councillor of State and director of the DFE, the increased need for financial resources by all States will probably lead to a renewed international debate on tax reforms according to the principle that "you tax where you consume", the which would also have repercussions for large Swiss companies. At the same time, Switzerland showed great efficiency and resilience during the COVID-19 crisis: «This, if combined with attractive taxation it could strengthen our attractiveness for wealthy people from other countries, "he added. Finally, there is the question of cross-border commuters: “The agreement with Italy for the lockdown period is pragmatic. The question of the letter of intent for a tax agreement signed in 2015 remains open: Lombardy and Ticino have given a strong signal, now it is up to Bern and Rome to arrive at a solution”».

Less taxes or more taxes?

They look at Switzerland, one of the main questions is how to use tax leverage. According to the national councillor and AITI president Fabio Regazzi there is no doubt: the post-COVID fiscal policy must have the task of leaving more room for manoeuvre for companies to manage to make the necessary investments to guarantee innovation, one of the key ingredients of Swiss competitiveness in the world. This for example through a reduction of the tax levy for companies on profits and dividends, or with the elimination of the stamp duty. At the level of individuals, we can think of tax relief on wealth taxes (very high in Ticino) or to simplify inheritance taxes.

Even for the councillor to the States, Marco Chiesa, we need to think about tax reliefs to revive the economy. For example, with a temporary reduction or exemption (as done in Germany) of VAT, especially for sectors such as gastronomy and tourism, strongly affected by the virus. Or encourage tourism in Switzerland with subsidies. Or even widen the meshes of global taxation. “In short - explained Chiesa - objectively we have no room for manoeuvre in fiscal policy. There is an individual responsibility and also in the coming months it will be necessary to demonstrate”.

For the Councillor to the States Marina Carobbio Guscetti instead, tax relief is to be excluded. "Just because they weren't introduced in the past, public finances today have allowed us to tackle the crisis so solidly," he explained. On the other hand, in order to finance the costs of public intervention, a higher taxation of households, which would be counterproductive for the recovery, must be excluded. Rather, one might think of a temporary measure such as a crisis fund financed by higher taxation on dividends, assets or estate successions. A reflection on the role of the SNB is also necessary. "A priori, however, fiscal policy overlaps with financial policy:

They fly for the revival

Among other things, public spending, as the economics professor at USI and SUPSI Amalia Mirante pointed out, has the advantage over tax cuts that it favours more specifically the categories of businesses or citizens most affected by the pandemic, in times short. “In Ticino, the economy is heavily based on sectors affected such as catering, commerce and culture. These are sectors that use more work than capital. On the one hand, they are the first to be helped, on the other, it is important to provide specific aid for structural investments such as machinery or technology that help create jobs in the medium term”.

And finally, for SUPSI professor Marco Bernasconi there are two fundamental issues not to be missed. The first is the protection of the households most affected by higher tax exemptions for low incomes, for an elementary question of solidarity. Unfortunately, in fact, the queues to receive a hot meal are getting bigger. The other is to think of contingent measures to recover falling tax revenues this year and next year. For example, eliminate the reduction of the cantonal multiplier, eliminate tax competition between cantons, think of a tax amnesty with a recovery of 2-5 years instead of ten, and finally, in Ticino, ask Bern to participate in the cross-border commuters paid in Rome.