Corporate Income Tax Reform in Switzerland

30 Pages Posted: 24 Apr 2003

See all articles by Martin D. Dietz

Martin D. Dietz

University of St. Gallen - Institute of Public Finance and Fiscal Law

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: December 2002

Abstract

This paper analyzes the likely economic consequences of a specific proposal for corporate income tax reform in Switzerland that is based on the recent ERU (2001) report. The proposal includes a partial dividend tax relief, more effective taxation of capital gains, and a property tax reduction, all relating to qualified stakes in corporate firms. Based on an analytical and quantitative analysis, we find that the reform removes an important tax barrier against dividend payments, reduces the cost of equity capital, thereby reduces debt leverage and encourages investment in the corporate sector. In stimulating transitional growth towards higher long-run income levels, the reform expands tax bases and thereby becomes considerably less costly in the long-run. A sensitivity analysis shows that the quantitative results are rather robust.

Keywords: Tax reform, financial policy, organizational choice, dynamic general equilibrium modeling

JEL Classification: C68, G32, H25

Suggested Citation

Dietz, Martin D. and Keuschnigg, Christian, Corporate Income Tax Reform in Switzerland (December 2002). Available at SSRN: https://ssrn.com/abstract=379360 or http://dx.doi.org/10.2139/ssrn.379360

Martin D. Dietz (Contact Author)

University of St. Gallen - Institute of Public Finance and Fiscal Law ( email )

Varnbuelstrasse 19
St. Gallen, CH-9000
Switzerland
+41 71 224 3086 (Phone)
+41 71 224 2670 (Fax)

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG) ( email )

Varnbuelstrasse 19
St. Gallen, 9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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