News
15.08.2022

Reform of withholding tax: new analysis from BAK Economics confirms positive cost/benefit ratio 

According to BAK Economics, the withholding tax reform to be voted on in a referendum on 25 September would pay off for both Swiss business and the State. This positive conclusion holds true even when pessimistic assumptions regarding the expected economic impact are used. 

BAK Economics first studied the macroeconomic effects of a comprehensive reform of withholding tax and stamp duty back in 2019. It found the cost/benefit ratio to be clearly positive. The reform plan underwent changes as it was debated by the Swiss Parliament. The current draft, for instance, exempts only newly issued Swiss bonds from withholding tax and the transfer stamp tax. The Alliance for the Reform of Withholding Tax commissioned BAK Economics to assess the macroeconomic effects of the reform that will actually be put to the vote. The resulting analysis concludes that this version would also have a clearly positive impact on Swiss business as well as on the State.

  • Value creation CHF 3.1 billion higher after five years

BAK Economics estimates that Swiss value creation would be around CHF 3.1 billion or 0.4% higher after five years with the reform than it would be without. Far from being a one-time effect, this would make the Swiss population better off year after year.

  • Government would also benefit: CHF 300 million more revenue after five years

As far as the government budget as a whole is concerned, the reform would break even after just three years and increase the net result from revenue and expenditure by some CHF 300 million after five years. The higher overall tax base would more than compensate for the loss of revenue from withholding tax and the transfer stamp tax. The budget surpluses that would be made possible compared with the status quo could enable public debt to be cut by around CHF 450 million by 2027. Since the positive effects would be compounded over time, BAK Economics forecasts additional revenue of more than CHF 2.0 billion in the year 2032.

  • Positive cost/benefit ratio even with pessimistic assumptions

The findings also prove robust in the face of much lower assumptions for the boost to the economy. Even assuming that the direct economic impact of the withholding tax reform will be only half as large as in the most likely scenario, BAK Economics still sees its main conclusion borne out: the reform of withholding tax would lead to increased value creation, higher tax revenues and improved public finances overall.

Read the study here (German).

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