Voters were asked on 12 February whether they accepted a federal law that was adopted by Switzerland's national council in June 2016 "with a view to enhancing the competitiveness of Swiss business".
The existing rates have to be abolished to bring the country in line with international standards, but the new proposals aim to avoid scaring off these businesses, the government said in its explanation of the voting options. Allowable deductions for research and development would be increased to encourage innovation, and a 'patent box' tax regime introduced to allow lower taxation of income from intellectual property.
The proposals, however, were rejected by 59.1% of voters (link in French). Only four cantons out of 26 voted yes.
Finance minister Ueli Maurer said the government now needed discuss its next move with cantons, and warned that companies could stop investing in Switzerland due to the uncertainty.
"It will not be possible to find a solution overnight," Maurer told a press conference.
Switzerland is being forced to make changes to its tax legislation to bring it in line with BEPS rules. BEPS refers to the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems so that little or no tax is paid. Following international recognition that the international tax system needed to be reformed to prevent BEPS, the G20 asked the Organisation for Economic Cooperation and Development (OECD) to recommend possible solutions. In July 2013, the OECD published a 15 point Action Plan and the final reports were published in October 2015. As a member of the OECD, Switzerland is obliged to take heed of the OECD recommendations.
Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com said: "The rejection of the proposals shows that implementing BEPS is going to be very difficult in practice, particularly for those countries where the government needs voters’ approval to update the tax system. But the difficulties in Switzerland pale into insignificance compared to the hurdles ahead in the US, where it seems likely that reform of some sort will be proposed soon – but whether it will comply with BEPS is much harder to predict."
Switzerland and the US approved a new framework last month designed to facilitate the flow of personal data between the two countries.
The Swiss-US Privacy Shield is based on and aligned with the EU-US Privacy Shield that was finalised last year, according to the US' International Trade Administration. The EU-US framework is the subject of a legal challenge.
The referendum also asked voters about naturalisation of young immigrants whose families have lived in Switzerland for three generations, and a national road building fund. Voters supported both of these proposals.