Despite sinking revenues from banking giants, the total tax contribution of Swiss heavyweight companies has barely shrunk during the recession, according to a study.Bank Credit Suisse confirmed at the weekend that it may not pay direct taxes this year despite making profits. Loss-making UBS is also proving barren ground for tax collectors, while other corporate earnings have fallen.
The case for UBS not paying tax on profits is clear, but Credit Suisse may also escape levies, despite turning in SFr5.9 billion ($5.77 billion) in profits so far in 2009, since it booked losses in previous years.
The dent in the federal purse and that of canton Zurich has been dramatic, as taxes on company profits declined a massive 70 per cent in 2008. But a study from tax consultancy firm PriceWaterhouseCoopers (PwC) pointed out that large firms make other contributions to the economy.
The study, presented jointly by Swiss Business Federation economiesuisse on Tuesday, revealed that while the corporate income tax of 58 of the largest firms plummeted, their total contribution fell by only 15 per cent.
Statistical gymnastics
The study performed this statistical feat by including social security and pension payments, and adding the amount of tax firms pass on from customers to the federal coffers.
This last item – called "taxes collected" – accounted for SFr1.78 for every franc paid in direct taxation. While the "collected tax" (such as value added tax on the sale of a car) may not have been paid by the company, the study argued that it was a direct result of the trade it conducted.
Taking all levies into account, the study concluded that the "total tax contribution" of the 58 firms – including Credit Suisse and UBS – fell only slightly from SFr21.7 billion in 2007 to SFr18.7 billion last year.
"On the one hand we have a very volatile corporate income tax that reacts sharply to business cycles, and other taxes that are very stable. These cancel out some of the reduction in income tax," economiesuisse spokesman Christoph Schaltegger told swissinfo.ch.
The study also showed that the combined tax bill of the 58 large firms made up 11.9 per cent of the SFr182.8 billion in federal, cantonal and municipal taxes and social security payments collected in 2007.
Taxes filtered to EU
"This means that a few companies are paying the majority of corporate tax. The corporate revenues we are using to build infrastructure and to finance education and schools comes from a very narrow base," Schaltegger said.
The report showed that Swiss firms contribute more "collected taxes" than other countries on average.
But PwC also admitted that withholding taxes, collected on the interest earned on Swiss bank accounts of European Union clients, represented a sizeable portion of these levies. This cash would be passed on to EU member states or consumed by associated administrative costs.
While it was not clear exactly how much of these taxes would be lost to other countries, it is clear that this would dilute the amount available to Switzerland.
However, economiesuisse trumpeted the findings as proof that big corporate earners in Switzerland contributed the lion's share of taxes.
"It is evident that large enterprises follow their financial and social responsibilities," economiesuisse director Pascal Gentinetta said.
Matthew Allen, swissinfo.ch
