Zug,24.04.2017

Canton could benefit from OECD's Base Erosion and Profit Shifting project

According to André Bieri, a tax expert and regional head of the Ernst and Young financial advisory company for central Switzerland, the canton of Zug could benefit by a project of the Organisation for Economic Cooperation and Development (OECD), known as Base Erosion and Profit Shifting (BEPS), which aims to curb the legal, but aggressive, tax planning of multi-national companies.
 
According to the website of the Swiss Federal Department of Finance, the keeping in check of these accompanies is to be achieved by the implementation of 15 measures, including the automatic exchange of country-by-country reports between tax authorities. However, this relates only to companies operating internationally with turnovers of more than CHF 800 million.
 
The main idea of the project is to ensure that profits are taxed in those countries where the creation of value actually takes place. It is as so many multi-national companies have offices, or even their headquarters, in the canton, that Bieri feels Zug could benefit, not least through the creation of greater demand for more highly qualified employees in this area.
 
Meanwhile, over in the offices of the Zug Cantonal Department of Economic Development, its director, Matthias Michel, confirmed he had noticed a certain level of optimism among a number of individual companies which operate internationally by expanding their activities here in Zug. “However, what is interesting is that none of these companies has given this BEPS project as their reason,” he said, adding that it may be other framework conditions, not yet finalised, which may be the cause.
 
For his part, Thomas Aeschi, who represents Zug in the National Council in Bern and is also a management consultant, said that it was not yet certain that Zug could benefit in this way and he repeated what the seven-member Federal Council had told parliament in Bern, namely that less money was expected from tax revenue in the future.
 
The SVP party member went on to explain that there were three possible scenarios; firstly that companies would increase their presence in Switzerland, or that, secondly, this would not be the case and, under pressure from other countries, opt to pay more tax there; or thirdly, having weighed up the pros and cons of having their company headquarters here, move them to another country. “This BEPS project is primarily of benefit to those large countries who have the feeling they are not getting enough income from tax,” he said.
 
For his part, Frank Lampert, who heads the tax division at the Zug Chamber of Commerce and who is also a tax expert at the KPMG management consultancy company, agreed with Bieri that a lot of companies in Zug would be affected.
 
He went on to say that how, in future, it would no longer be possible for all profits of a company to be channelled through, say, an off-shore company on some island in the Caribbean where it has just one sole employee, especially bearing in mind those involved in the creation of value of the company were employed elsewhere. Hence he felt that, if such companies were already located in Zug, they could well extend their operations here. “Apart from fiscal issues, what is also important is that a good infrastructure is in place and that there is sufficient appropriate housing for additional staff,” he said.