Switzerland faces uncertainty after tax plan rejected

Zurich: Switzerland faced uncertainty on Monday after voters rejected a tax reform plan aimed at keeping the country attractive to foreign businesses but derided by critics as a corporate handout.

The wealthy Alpine nation had come under intensifying pressure from the Organisation for Economic Cooperation and Development (OECD) over a tax regime that treats foreign companies more favourably than domestic ones.

The OECD has called the Swiss system harmful and said it fuels market distortions. Bern had promised to resolve the issue by 2019.

Central to that effort was a government-backed plan approved by parliament but defeated by 60 percent of voters in Sunday's referendum, the latest poll in Switzerland's direct democracy system.

The proposal would have levelled the tax rate for domestic and foreign firms while creating new deductions for innovation as well as research and development, tailored to attract global companies.

"There is now a real danger that Switzerland will disappear from the radar of international companies," Finance Minister Ueli Maurer was quoted as saying Sunday by the RTS public broadcaster.

He also confirmed that Switzerland will not meet its pledge to the OECD on reforming its tax system within two years.

Bern is under pressure to resolve the impasse quickly amid fears that companies will start putting money in places where long-term tax stability is assured.

There is even a risk of Switzerland's "blacklisting" by the OECD and European Union, the Zurich-based chief of PricewaterhouseCoopers, Andreas Staubli, was quoted as saying by the Bloomberg news agency.

Swissmen, which represents the mechanical and electrical engineering industry, said in a statement that the government should "quickly find a solution for a new reform plan", warning that Sunday's vote had plunged companies into "a great deal of uncertainty."

But opponents of the reform plan were rejoicing.

The leftwing Socialist Party (PS) called the government's plan a "scam" that would have forced ordinary taxpayers to fill inevitable revenue shortfalls.

The referendum had "shown the red card to arrogance" the party said in a statement, claiming the days of giving sweetheart deals to powerful corporations were "no longer tolerated."

The PS however said it was committed to working with the government in generating a new plan to address both the OECD and EU concerns, while also appealing to voters.