Will the Swiss Franc fall after Swiss tax reforms?

[Djamel Brahimi]

[Jon Steeler]

So as of May the 19th Switzerland will be having a big vote on business tax reforms in the country. This vote is to decide whether there are reforms to the special rate in tax that is currently offered to multi national companies, this special rate encourages companies to move their operations into the country in order to benefit from the low tax which can be as low as 7%, although this rate does not apply to “normal” businesses in Switzerland. 

If the reforms do come to fruition then businesses will all be under one tax rate which will be lower then the current tax rate for “normal” businesses but not as low as was offered to the multi national companies they were trying to attract with the “special” rate. It is currently expected that the reforms will be voted for and the reforms will pass, if they do then they would come into force as of January 2020.

The benefits of implementing the tax reforms would be 

• Complying with international standards
• Wont be blacklisted by the EU as a tax haven
• All businesses under one rate of tax

The cons of the reforms are

• Could deter foreign businesses from moving operations to Switzerland
• Current multi national businesses in the country may be more inclined to move elsewhere 
• There is no incentive for other businesses outside the country to move their headquarters into Switzerland

So it seems that either way the reforms in tax could hinder the Swiss economy at least at the beginning. If they come in then they risk foreign investment and if they are not voted in then they will be blacklisted by the EU and they would double the tax on Swiss companies. My outlook for the Swiss franc in this case would be to the downside as their are negatives to both sides of the vote for the economy. Only some global macro issues and investors moving to safe havens could give me a reason to buy the CHF.