Zurich Zurich Cantonal Council lowers taxes on profits and protects major shareholders

Lower taxes on profits for companies and the same tax rebate for major shareholders: this is what the Zurich Cantonal Council decided on Monday at the first reading when discussing the second part of the "2017 tax bill". The left-wing side of the council intends to launch a referendum.

Finance Director Ernst Stocker (SVP) had already announced this further reduction in income tax some time ago. The reduction from 7 to 6 percent is an important step, he said on Monday. The aim is to keep companies and thus tax money in the canton of Zurich and prevent them from moving to cheaper cantons.

His proposal originally also included a certain amount of compensation for the municipalities and canton: Stocker wanted to make major shareholders pay more in return for the profit tax reduction by now taxing 60 out of every 100 francs of profit distribution. Previously, only 50 francs were taxable.

"Punishing the entrepreneurs"

However, the conservative parties, including the GLP, removed this higher taxation from the bill. They believe that an increase in dividend tax would hit the wrong people. Large shareholdings are primarily held by owners of SMEs - not shareholders of large companies.

"A higher dividend tax would be a punishment for entrepreneurs," said Patrick Walder (SVP, Dübendorf). The GLP was of the same opinion. "Companies are not our enemies. They are first and foremost employers," said Cristina Cortellini (Dietlikon). The canton and municipalities could cope with the loss of tax revenue.

However, it is unclear how much money the state will have to forgo with the tax bill that has now been passed. The government's calculations - around CHF 130 million - were previously based on the assumption that dividend taxation would be increased. However, this partial compensation by the major shareholders is now missing.

"An affront to the population"

The left-wing side of the Council voted unanimously against the further tax cut and the discount for major shareholders - and has already announced a referendum. "While salaries and pensions have to be fully taxed, dividends should continue to be 50 percent tax-free. This is an affront to the population," said Jasmin Pokerschnig (Greens, Zurich).

The AL criticized the fact that "otherwise already spoiled companies" are to be given another tax gift. And this despite the fact that the canton of Zurich had no need to take part in the tax competition, said Judith Stofer (Dübendorf).

"They will fall flat on their faces"

Donato Scognamiglio (EVP, Freienstein-Teufen), who is particularly critical of the slowdown for major shareholders, already has an inkling of how the referendum will end. "The population will not swallow this", he predicted. The government's proposal was balanced. However, it had been sacrificed for the sake of principle and in the end the conservative side would have nothing.

Thomas Forrer (Greens, Erlenbach) also warned the conservatives not to "go for the maximum". Of course, the trade association does not want higher dividend taxation. But this would increase the risk of "falling flat on our faces in the vote."

"Respect for the vote"

The cantonal government will support the bill in the form decided by the cantonal council - i.e. without higher dividend taxation. Stocker is aware that this starting position will be difficult. "I have a certain respect for this referendum."

The cities of Zurich and Winterthur have already decided to reject the proposal due to the large tax losses.

SDA