On September 25, Canton Zurich is set to vote on whether to raise taxes on rich entrepreneurs. As part of the September round of Swiss referendums, the idea would increase the tax threshold on well-performing investment assets from 50 to 70 percent.
Currently, entrepreneurs in Zurich who own at least 10 percent of shares in a company, and make a net profit of more than 100.000 francs a year out of dividends from said shares, are only taxed on 50 percent of the income made from the investment. The current proposal, to be voted on by Swiss citizens in September, hopes to raise the threshold from 50 percent of earnings to 70 percent.
The "No tax breaks for major shareholders" initiative argues that the current rules mean that 50 percent of wealthy investors' earnings are essentially "tax-exempt." Unlike pensions and salaries - where 100 percent of earnings are taxed - the current system makes dividends more profitable than regular income streams.
“Everyone has to pay 100 percent tax on their income. Not so [for] big shareholders. That is lacking in solidarity, unfair and also weakens the AHV,” noted Cantonal Councillor Melanie Berner. Speaking to 20 minuten, she argued that the idea would not weaken small businesses as “a large proportion of small to medium enterprises generate less than 10.000 francs in profit and are therefore not affected. Those most affected are the rich and super-rich with preferentially taxed dividends of 100.000 francs and more.”
Opponents argue that increasing taxes on dividends would hurt Zurich’s reputation as a good place to do business and may actually reduce tax income as rich residents move away. These thoughts were echoed by the president of the Swiss People’s Party in Zurich, Domenik Ledergerber, who told 20 minuten that business taxes are already quite high. “The companies are facing major challenges due to the COVID crisis, the Ukraine war and inflation”, he noted.
According to 20 mintuen, opponents make the point that other Swiss cantons like Nidwalden - which has been found to have the lowest business taxes in the world - already have an equal or lower tax threshold than Zurich, and that the vote would put the canton at a huge disadvantage compared to its neighbours.
While the proposal does not have the support of the cantonal government, it does have the backing of three major political parties - the Social Democratic Party, the Greens and the Federal Democratic Union. The result is expected to be announced after 12pm on September 25.