Macro 2 minutes to read

Swiss vote for EU rules, but the real hurdle is yet to come

Michael McKenna

Head of Editorial Content, Saxo Bank

Summary:  Sunday's Swiss vote on firearms and taxation saw voters agree to move closer to European Union standards, but the true test is yet to come.


Switzerland overwhelmingly chose to move closer to European Union tax and firearm regulations on Sunday, with 66.4% of voters backing a corporate tax reform programme that will eliminate special tax breaks for multinational corporations.

Under the new legislation, the 24,000 foreign firms based in Switzerland will lose the exemption that allowed them to pay less tax than their domestic counterparts. The Swiss government, however, will lower baseline rates across the board to prevent these firms seeking greener pastures elsewhere.

As part of the deal tabled Sunday, Bern will also allot an extra CHF 2 billion to the state pension scheme, a move that has led forecasters to project a budget shortfall of precisely this amount.

'They had no choice'

The scope, cost, and nature of the programme likely reflects a measure of anxiety among Swiss officials, who have long desired alignment with OECD and EU regulations concerning taxation.

“Sooner or later, Switzerland would have been forced to overhaul its corporate tax rules,” says Saxo Head of Macro Analysis Christopher Dembik, adding that “it could have come from the EU or the US, but ultimately the country had no choice”.

“The initial, negative impact on the Swiss budget could prove complicated, but the new fiscal regime is not bad at all, says Dembik.

“Firms will be able to cut costs by claiming deductions on income from patents or R&D spending, business attractiveness remains still very high, the economy is resilient despite the trade war’s impact and the unemployment picture is still bright. I think Switzerland will be entirely able to offset the outcome of this vote.”

Equities face late-June standoff

Although the taxation scheme has been settled, it is Switzerland’s next round of voting that could prove most crucial for investors.

At the end of June, EU recognition of the Swiss stock exchange expires, with Bloomberg reporting that Brussels has made continued access contingent on Bern agreeing to a “framework” deal that’s unpopular with voters.

Aside from guaranteeing recognition of the Swiss exchange, the new framework would tighten the Swiss-EU relationship to a point that could see new EU laws (on wages, free movement, transport, and more) automatically applied to Switzerland, conflicting with the Alpine nation’s historic tradition of self-determination.

These negotiations have been ongoing for more than four years. In the worst case, EU equity traders could lose access to the Swiss exchange, removing a great deal of volume and liquidity from the SIX.

For its part, Switzerland has threatened to ban European exchanges from listing Swiss shares.

While Bern may have proved content to move closer to Brussels on taxes Sunday, the equities debate and the overall framework of which it is a part threatens to be far more contentious.

EURCHF (daily, source: Saxo Bank)
Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Pty Ltd.
Level 25, 2 Park Street
NSW 2000
Sydney
Australia

Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Combined Financial Services Guide & Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as CFDs and Margin FX products may result in your losses surpassing your initial deposits. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.