Switzerland Issues Position Paper On Taxing The Digital Economy

; posted on
March 16th, 2018

The State Secretariat for International Financial Matters (SIF) of Switzerland released a position paper, stating that the digitalised economy should be tax properly without being hindered.

Principles Not to be Undermined

During the process to explore new solutions to tackle digital economy tax issue, the Switzerland finds it crucial to persist the principle of levying taxes where added value is generated should not be undermined in the process. In addition, as an important location for companies operating internationally, Switzerland also has an interest in tax rules that allow for and promote fair competition.

Position of Switzerland

  • The taxation rules must be thoroughly reviewed. Digitisation has changed business models. Some jurisdictions have responded and already introduced unilateral measures.
  • For the taxation of the digitalised economy, it is necessary to favour multilateral approaches which tax profits in the jurisdiction where added value is generated and which do not cause double or over-taxation.
  • Measures outside the scope of double taxation agreements are to be avoided. These include, for example, an excise tax on digital transactions, which can lead to over- and double taxation.
  • If a country wishes to introduce short-term measures – because an international consensus on long-term and definitive solutions is a long way off, for instance – they must be designed in a manner that is as targeted and as narrow as possible, be applied to both domestic and foreign companies and be limited in time (sunset clause), in order to reduce double taxation and over- taxation and minimise the negative effects on the digitalised economy, especially start-ups and SMEs. An example of such a targeted measure would be an excise tax that is limited to the digital advertising of large companies with an annual consolidated turnover exceeding EUR 750 million and that contains a sunset clause.
  • Long-term measures are to be found within the framework of the existing international tax rules and the existing OECD Task Force on the Digital Economy. Binding standards are generally to be preferred over recommendations or overviews.

Sources: State Secretariat for International Finance (SIF)

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