Look To Switzerland For Sound Corporate Tax Policy

As the Obama Administration continues its attack on employers in the U.S. through its refulsal to reduce the job-destroying corporate tax rate - the highest average corporate tax rate in the world at almost 40% - businesses are more and more often fleeing this crushing burden by fleeing to more competative jurisdictions.

Rather than continueing this trend of crippling our businesses, one country  the Administration should look to for guidance is Switzerland. As BuysinessWeek reported last week:

"This isn't the Switzerland of shadowy private banking, the kind that got Zurich giant UBS into trouble when it was forced to reveal details of American account holders suspected of tax evasion. Instead, Swiss cantons are openly and legally urging multinationals to relocate. This fall, U.S. fast-food giant McDonald's will move its European headquarters to Geneva from London, joining Kraft Foods, Yahoo!, and Nissan. They've all relocated their main Europe offices to Switzerland in the last two years to take advantage of low corporate taxes.

The 26 Swiss cantons are free to set their own rates, so Swiss-based companies' effective average tax rates range from 10.8% to 24% of net income (those effective rates include federal taxes, which are the same throughout the country). Ten cantons even cut rates in 2008 to lure investment. After slashing its corporate rate to 6.6% in 2006, the canton of Obwalden lowered rates to 6% last year, just after the nearby canton of Appenzell Ausserrhoden did the same. "A company might pay 50% less tax just by moving 30 miles down the road," says Martin Naville, CEO of the Swiss-American Chamber of Commerce in Zurich."

Taxes influence behavior. Even on a personal level, from 1997 through 2007, the ten states with the highest tax burden lost over 3 million residents to the other states. These residents took with them a staggering $82 billion in income.Tax competition is vital to ensure low tax rates. Unfortunatly, when it comes to corporate tax competition, it seems the Obama administration is determined to lose the race.

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