Out-Law / Your Daily Need-To-Know

Swiss administrative region asks residents to delay tax payments

12 Jan 2016, 4:48 pm

Taxpayers in one of Switzerland's administrative regions will no longer receive discounts for paying their taxes early, as the local authority wants to avoid having too much cash in its own bank accounts, according to press reports.

The Financial Times said that Zug, one of Switzerland's 'cantons', intended to discourage taxpayers from settling their taxes early. As many Swiss banks have begun to charge negative interest rates on many larger clients' accounts, the canton believes it could save SFr 2.5 million ($2.5 million) a year as a result of the policy change, the paper said.

The canton has not yet been charged negative interest rates on its accounts, "but the next few months and years will show where the journey is leading", Peter Hegglin, its finance director, told the Financial Times.

The Swiss central bank moved to a negative interest rate in December 2014 in an attempt to ease pressure in the Swiss franc. The rate is currently minus 0.75%.

"Considering the long lasting phase of low interest rates in Switzerland and the negative interest rates which have to be paid, the canton has no incentive to motivate taxpayers to make early payments," Zug authorities said in a statement, according to the Financial Times. "On the contrary, the canton has an interest in receiving money as late as possible — so it pays less negative interest."

The canton will also no longer charge interest in late tax payments, although there will still be financial penalties, the Financial Times said.

The Swiss National Bank said last week that it expects a loss of SFr23 billion ($23 billion) for 2015, largely due to the decline in its foreign currency holdings since removing the 'pegging' of the franc to the euro last January.