Voting on February 13, 2022 – Abolition of the emissions tax

On February 13, 2022, the Swiss people will vote on an amendment to the Federal Act on Stamp Duties. The proposal put forward by the Federal Council and Parliament aims to abolish the issue tax with the goal of making it easier for companies to raise equity capital.

Issue, turnover, and insurance tax

The issue tax is one of three stamp duties regulated by the Federal Act on Stamp Duties (StG) of June 27, 1973, alongside the turnover tax and the insurance tax.

• ‍Issuance tax: The issuance tax is levied on the issuance of domestic securities. If a company issues company shares (stocks, common shares, participation certificates, or profit participation certificates), the federal government levies a tax. The issuance tax is payable when a company is founded or when its equity capital is increased.
• ‍Turnover tax: Turnover tax is levied on the turnover or trade in certain domestic and foreign securities.
• ‍Insurance tax: Insurance tax is levied on the premium payments of certain insurance policies.

The issue tax amounts to one percent of the equity capital raised, with an exemption limit of one million Swiss francs.

Example: If a company spends 1.5 million Swiss francs, it must pay an issue tax of 5,000 Swiss francs on the amount exceeding the exemption limit of 500,000 Swiss francs.

In addition to the exemption limit, the legal provisions on the issuance tax provide for various exceptions. Under certain conditions, non-profit companies, such as housing cooperatives, are exempt from taxation.

Economic significance of the issuance tax

According to the Federal Tax Administration (FTA), around 2,300 companies paid the issuance tax in 2020. As some of these companies raised equity capital on multiple occasions, there were over 2,500 transactions in total. A total of 2.2 percent of transactions generated 51.5 percent of tax revenue, while the remaining 48.5 percent of tax revenue was attributable to the other 97.8 percent of transactions.

According to the FTA, revenue from the issuance tax fluctuates greatly, with no clear upward or downward trend. Over the past twenty years, the lowest figure was CHF 120 million (2005) and the highest was CHF 407 million (2017). On average, revenue amounted to around CHF 250 million.

Referendum launched against the proposal by the Federal Council and Parliament

The proposed amendment to the StG aims to abolish the issuance tax. In future, companies would be able to raise equity capital without having to pay tax on it. The National Council voted in favor of the amendment by 120 votes to 70, with 5 abstentions. In the Council of States, the revised text of the law was adopted with 29 votes in favor, 14 against, and one abstention. A referendum has been launched against the proposal by the Federal Council and Parliament.

Arguments in favor

Proponents of the proposed amendment believe that abolishing the emissions tax will have a positive impact on the economy as a whole, Switzerland's attractiveness as a business location, and jobs.

• ‍Securing jobs: The Federal Council and Parliament argue that the emissions tax would hamper Swiss economic growth by making investment more expensive. Abolishing the tax, on the other hand, would promote positive corporate development and secure jobs.
• ‍Hardly widespread internationally: The emissions tax is also an internationally uncommon tax. Apart from Switzerland and Liechtenstein, only Greece and Spain have a comparable tax in Europe.
• ‍Avoiding burdens at inopportune times: Another argument is that the Swiss economy would be burdened more heavily in times of crisis. In economically challenging times, companies regularly need more capital. The issue tax represents an additional burden in these already challenging times.
• ‍Reducing the risk of debt: Because borrowing capital, for example in the form of loans, is not taxed, companies have an incentive under current law to finance their businesses with loans. Abolishing the issue tax promises to reduce the risk of debt in return.
• ‍Do not disadvantage start-ups: Unlike established companies, which can regularly finance their investments with retained earnings, start-ups are particularly dependent on raising equity capital. This disadvantage will be eliminated if the proposal is accepted.
• The issuance tax is unfair: Because the issue tax is levied regardless of whether an investment proves profitable or not, and economic performance is therefore not taken into account, the current regulation is widely perceived as unfair.
• ‍New international rules provide balance: Last but not least, supporters of the proposal argue that the OECD could soon decide on an internationally applicable minimum tax for companies. If this happens, there is a risk that Switzerland will lose its locational advantage due to low profit taxes. Abolishing the emissions levy could counteract this loss.

Arguments against

The referendum committee justifies its call to reject the new draft law with the expected hole in the state budget. They also criticize the fact that mainly large corporations, banks, and insurance companies with strong financial resources would benefit from the change.

• ‍Deficit in the state coffers: Opponents of the bill coming to a vote fear that the expected loss of tax revenue of CHF 250 million will result in cuts in services or will have to be offset by higher taxes on private individuals.
• ‍Preferential treatment for the financial sector: Furthermore, the abolition of the issuance tax would further favor large corporations, particularly those in the financial sector, which already enjoy preferential treatment.
• No advantages for young companies: Contrary to the statements made by the Federal Council and Parliament, the proposal would also do little to promote investment. In 2020, only 55 large corporations would have received more than 50 percent of the new privileges under the proposed abolition. Start-ups and SMEs, which are important for the Swiss economy, would not benefit from the changes.

Source: Explanatory notes of the Federal Council on the referendum of February 13, 2022, amendment to the Federal Act on Stamp Duty, p. 36 ff. (voting booklet).

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