Opinions differ on the OECD supplementary tax

The canton of Zug wants to introduce its own additional profit tax for companies. But this has not gone down well with all the political parties.

The plan recently presented by the Council of States (Ständerat) Finance Committee was less than favourable for the canton of Zug. The committee wants more money for the army - and a different distribution of the income from the OECD minimum tax (OECD MIndeststeuer), so that the Confederation would receive more money, and the cantons less than initially proposed.
The Zug government responded by announcing an additional cantonal tax on corporate profits, as other cantons have already introduced, or plan to introduce. Specifically, corporate profits of more than CHF 20 million are to be subject to a 3% tax in Zug in future. The federal government would not receive any of this revenue, however.

As a reminder, the international Organisation for European Cooperation and Development (OECD) uses the Minimum Tax to limit competition between countries. Companies with a turnover of at least CHF 750 million per year must pay at least 15% of their profits in tax. Cantons with lower corporate taxes, such as Zug, are particularly affected by this. The currently rate there is 11.8%. Large corporations that are affected by the OECD rule must pay the tax here, but the distribution of this tax is currently the subject of dispute. The new cantonal profit tax would ultimately replace it.

Zug's tax policy attracts international companies, such as the American pharmaceutical company Pfizer.    Photo: Dominik Wunderli

 

Legal uncertainty and location attractiveness
The aim of this measure is to ‘avert avoidable damage to the canton of Zug’, said Heinz Tännler, Director of Finance of Zug, when asked by the Zuger Zeitung newspaper. On the one hand, the Council of States committee has created an ‘unnecessary phase of legal uncertainty’. ‘We need a workable solution as of 1st January 2026, so that we can correctly assess companies for tax purposes in good time.’ As there will be no certainty about the definitive distribution key until the spring of 2025 at the earliest, there is a maximum of nine months to do so. ‘That's too short,’ says Heinz Tännler: a normal legislative process takes around two years.

On the other hand, the aim of the government is to mitigate the negative impact on the attractiveness of the canton of Zug that is feared as a result of the OECD minimum tax. The expected additional revenue from the cantonal profit tax is also to be used for this purpose. Heinz Tännler speaks of around CHF 310 million, according to a ‘rudimentary, highly uncertain estimate’. Specifically, this involves investments in social measures and the strengthening of sustainable infrastructure, as well as sustainability and innovation impulses for Zug companies, as the Zug government already announced in the spring.

Criticism from the left
How is the project being received by Zug's political parties? There is clear criticism from the ALG (Alternative Green party). For them, the government's move lacks solidarity. ‘While the canton of Zug is making millions in surpluses, the federal government is missing out on hundreds of millions of Swiss francs as a result,’ the press release states. ALG cantonal councillor (Kantonsrat) and party president Luzian Franzini (Zug) emphasises: ‘It benefits no one if the canton of Zug simply rakes in the money without investing it.’ The supplementary tax should be rejected. ‘This is the only way to prevent the federal and cantonal finances from drifting further apart.’

The SP (Socialist party) is also critical.
'Who is more dependent on the OECD tax revenue? It's the federal government,’ writes cantonal councillor Christian Hegglin (Zug). If the cantonal profit tax is introduced, the proceeds should be used, among other things, ‘to alleviate the disadvantages of the current location policy’, he demands. ‘That much solidarity is a must.’ For a substantial proportion of the population, the disadvantages of Zug's economic policy are increasingly outweighing the advantages. Specifically, he mentions the high cost of housing. ‘This ‘race to the bottom’ must be stopped,’ says Christian Hegglin.

Support from the centre-right
The Mitte (Centre) Party has not yet been able to discuss the matter in the parliamentary group, according to parliamentary group leader Fabio Iten (Unterägeri). For him personally, however, it is clear: ‘It is unacceptable and unfair that the canton of Zug should be expected to compensate for the deficit in federal finances.’ In addition, the people have clearly accepted the new OECD minimum taxation with the corresponding distribution key. ‘Wanting to change the rules of the game now is completely lacking in solidarity.’ The canton of Zug, on the other hand, has always shown solidarity and a willingness to compromise: ‘While other cantons are not already getting a better grip on their state budget, the canton of Zug pays more into the national financial equalisation system year after year.’

The FDP (Liberal party) speaks of a ‘targeted, but also necessary step’. Because: ‘Instead of making savings in the federal budget, the federal councillors are simply looking for new sources of money - this time from Zug,’ writes cantonal councillor Flurin Grond (Neuheim). In view of the fact that other cantons have already increased their taxes on profits, it is ‘only right that the canton of Zug defends its interests independently’. This was necessary to ensure the attractiveness of the business location and to create clear conditions for the companies affected, especially as the introduction of the OECD minimum tax would remove a competitive advantage for Zug as a business location, said Grond. ‘Zug had to take action now in order to remain viable in the long term.’

No comments were received from the GLP and SVP within the set deadline.

According to Finance Director Heinz Tännler, the additional profit tax is to be ‘fed’ into the parliamentary process at the beginning of January. The first meeting of the preliminary committee will then take place. If the government has its way, the new tax should then come into force on 1st January 2026.

Lucerne considering the step
Is the canton of Lucerne also considering an additional cantonal profit tax? ‘The government are currently making considerations similar to those in the canton of Zug, although no decisions have yet been made,’ says Reto Wyss, President of the Lucerne Cantonal Government and Finance Director. It remains to be seen when a possible measure will be presented. Reto Wyss intends to intensify talks with his own representatives in Bern, until the final decision is made by the federal parliament in the spring.