Monika Rühl, Chairwoman of the Executive Board of economiesuisse

To finance investments, companies rely on money that they borrow through bonds, for example. These bonds are subject to withholding tax: the bond business is moving out of Switzerland, as are value added and tax revenue. On 25 September, we will be able to remedy this situation by voting YES to the withholding tax reform.

Raising financing via Swiss bonds has a major drawback: it is uninteresting to foreign investors because the bonds are subject to withholding tax. This is not automatically refunded to the companies, which forces them to obtain financing abroad where there is usually no such withholding tax.

Luxembourg: Switzerland = 190:1

Foreign countries benefit from this situation by withdrawing tax revenues and value added from Switzerland. The worst example of this is Luxembourg: it beats Switzerland devastatingly with 190:1. This is because the volume of bonds in relation to gross domestic product is 190 times greater in this small Benelux country than in Switzerland. Correspondingly, companies finance themselves in locations that are “favourable” for investors.

Meanwhile, the Swiss capital market is slowly but surely drying out and becoming increasingly unattractive. The bond business in Switzerland has halved over the past 12 years, while Swiss companies have issued bonds to the value of CHF 470 billion abroad. A vicious circle which we have created ourselves, but from which we can also free ourselves.

Broad support for reform with a sense of proportion

If Switzerland wants to regain its attractiveness in the bond business, it must change the framework conditions. There is a broad political consensus on this: the Federal Council, Parliament and the vast majority of the parties support the withholding tax reform. It provides for the abolition of withholding tax on newly issued bonds. Proponents also include the Green Liberals, the centre, FDP and SVP, but also cantonal finance directors, business associations, chambers of commerce, the trade association and the farmers' association.

The withholding tax reform is selective. Only newly issued domestic bonds will be exempt from withholding tax in future. This ensures that short-term revenue shortfalls are minimised. On the other hand, nothing will change in the far more important area of dividends, which are responsible for the federal government’s billions of revenue. As a result, the reform will already generate additional revenue for the government in the medium term. Significant economic benefits can be achieved with low short-term costs.

The whole of Switzerland wins

Thanks to the reform, our companies will once again be able to increasingly refinance themselves through the Swiss capital market, while foreign investors will also be willing to buy these bonds. Everyone who wants to borrow money benefits from the opening up of the capital market: companies in all sectors, but also the Confederation, cantons, municipalities, hospitals, energy suppliers and public transport operators. Today they are forced to pay high interest on the capital raised. Without withholding tax, investors would be prepared to provide this capital on more favourable terms. This would enable the public sector in particular to save on interest costs and make better use of taxpayers’ money.

Public sector as winner

Falling interest costs mean that public utilities can make investments cheaper and therefore more attractive: hospitals, for example, finance construction projects with bonds. Energy suppliers can invest in both security of supply and climate protection on better terms. Swiss taxpayers will ultimately also benefit from these investments. For all these reasons, I strongly recommend that you vote YES to the withholding tax reform on 25 September 2022.