Stop gifting tax revenues to other countries! 

On 25 September, we will vote on a reform of withholding tax. Voting “Yes” will bring business worth CHF 900 billion back into Switzerland, creating jobs and increasing Swiss profit and income tax revenues as well as contributions to the state pension system. 
Article byUrs Kapalle

What is this vote all about?

Switzerland has created a problem for itself. Its withholding tax has driven corporate finance and a lot of other banking business abroad. At present, Swiss companies are more or less forced to finance their investments via other countries. This is a lucrative area of business that would generate tax revenues, create jobs and put money into state pensions. The Federal Council and the Swiss Parliament have long since acknowledged this issue and want to set it right once and for all with a reform of withholding tax. They want Switzerland to stop giving away tax revenues, jobs and pension contributions to other countries. The Left, however, is seeking to block this long-overdue reform and ensure that Switzerland continues to put itself at a disadvantage.

How do we arrive at a figure of CHF 900 billion1?

It is clear that reforming withholding tax will benefit all companies in Switzerland across all sectors, but the estimated volume of business affected in the banking sector alone is around CHF 900 billion. This is money from Swiss companies that should be staying in Switzerland!

  • Fiduciary investments: Swiss banks hold fiduciary investments worth some CHF 150 billion at banks abroad (e.g. in London or the US) on behalf of their clients. The main reason for this is the withholding tax on interest income that would be payable in Switzerland. Were it to be abolished, more than half of these investments could well be repatriated within five years – in other words, around CHF 80 billion.
  • Bond issuance: The volume of outstanding Swiss corporate bonds is approximately CHF 800 billion, but bonds issued in Switzerland only account for roughly CHF 330 billion of this total. The rest, i.e. around CHF 470 billion, were issued abroad due to the withholding tax on interest income that would be payable in Switzerland. The reform could bring roughly a quarter of this – about CHF 115 billion – back into Switzerland in the space of five years. It would also enhance Switzerland’s appeal for foreign issuers in much the same way as Luxembourg has already stolen a march on Switzerland with regard to sustainable bonds. This would mean additional potential for foreign new issuance amounting to approximately CHF 475 billion within five years, which equates to half the volume of bonds currently issued in Luxembourg by foreign companies (CHF 950 billion).
  • Investment products: Swiss banks are strong in the business of structured products, the “precision timepieces” of the Swiss financial industry that meet very individual needs and thus enjoy high demand internationally. Their average volume is around CHF 200 billion, but they are all issued outside Switzerland – yet again due to the withholding tax on interest income. Without that tax, this business could be repatriated, making growth of 3% a year or CHF 30 billion over five years a realistic prospect.

How will we all benefit?

If we can draw these sums back into Switzerland, the result for our country will be more jobs, more profit and income tax revenues and more money flowing into state pensions. However, the opponents are hoping that their referendum will force Switzerland to continue putting itself at a disadvantage. They simply accept the fact that, day after day, Switzerland is gifting potential tax revenues, jobs and pension contributions to other countries. This defies all logic – especially now, when it is so important for us to correct long-standing faults in our tax system quickly so that our country can become internationally competitive again and be equipped to face the challenges that lie ahead. This is precisely what the withholding tax reform aims to do, and the Federal Council believes that the cost/benefit ratio is excellent. The reform will bring tax revenues, jobs and pension contributions back where they belong, ensuring stability and healthy public finances. It will bring success back to Switzerland.


1 SBA estimate based on BIS, SNB, SSPA and SBA data.


Urs Kapalle
Head of Tax Strategy
+41 58 330 63 00