Complete News World

America sets the rules

America sets the rules

Other countries have no chance to put pressure on the world’s most powerful economy. How should Switzerland react?

Monument on Mount Rushmore: America makes the rules, others enforce them.

Scott Olson/Getty

Swiss class nerd. When it comes to the international minimum tax, everything is on track: in June, a hastily conducted referendum clearly approved it with 78.5%. To be implemented next year. Problem solved?

Absolutely not. Because suddenly the economy realizes that the reform it so urgently wanted is not urgent at all. On Friday, the NZZ umbrella organization Economiesuisse recommended a postponement – at least for a year. The Economic Commission of the State Council followed suit on the same day: the Federal Council should investigate whether the regulations could be implemented later than planned.

In fact, 140 countries – 195 countries in total – have agreed to require a global minimum tax rate of 15% for large, multinational corporations. It should finally eliminate annoying tax havens.

Switzerland has been greatly affected by this. In most provinces, companies pay less taxes. But the big tax revolution is still missing. Only a few states will be ready next year. After all, they are neighbors: the European Union, Great Britain, Australia, Japan, South Korea and Canada. But major economies like China and India are far from introducing regulations.

Likewise America – everywhere. Because the reform was initiated by the Americans. However, the great power itself failed to implement it. It is yet to be passed in Parliament. This is not the first time that the Americans have imposed world rules that do not apply to them. “Of course it’s sad,” says Alfred Mettler, who taught economics in the US for many years and now works at the Swiss Financial Institute (SFI).

See also  Laura Kraut and Paludineau lead USA to victory in Mexico Nations Cup.

End of banking secrecy

Example: Basel Protocol: Named after the headquarters of the Bank for International Settlements (BIS), countries have been developing common banking regulations since the 1990s. Essentially, it is about the level of equity and liquidity that banks need to meet to be prepared against crises.

The United States was initially the main driver of these international norms. But they don’t want to fully implement Basel II. For Swiss banks, on the other hand, not only do strict Basel III regulations apply – but they are further tightened by Finma’s so-called “Swiss Finish”.

“The Americans argued at the time that they didn’t have to implement all of these regulations because banks have different rules, but the truth is: they could and wanted to do it quickly with 7,000 banks. No.”

Another American law with the infamous name of FATCA penetrated deep into the Swiss consciousness – because it ultimately buried banking secrecy. Since 2010 — in response to the financial crisis — the U.S. has been requesting information on the tax data of Americans living abroad. Switzerland has had a related agreement with the United States since 2014. But it works one-sidedly. This means that Americans do not have to provide any data.

It is this double standard that Switzerland has yet to really let go of. The US continues to tolerate black money activities in its region as the local banking hub makes serious efforts to clean up its operations. The small states of Delaware and South Dakota are global tax havens.

See also  Premier League: Summer 2023 in America?

“That’s not very pleasant either,” says banking professor Mettler. But there’s a reason the U.S. itself doesn’t provide any data: It’s the only country in the world — along with Eritrea — that taxes its citizens based solely on their passports, not their place of residence. Since Swiss residents living in the US do not pay taxes in Switzerland, a reverse data flow would be of little use to Switzerland.

Others should watch when Americans don’t move — are they really doing it on purpose? It’s not that simple. “One must not forget: when the president changes in American elections, the whole administration changes. You might say: the whole philosophy,” says Alfred Mettler.

There is no other way

Americans are often serious about reforms. They don’t want to exclude themselves, says Mettler. But like everywhere else, the wheels of democracy grind slowly in America. The country is polarized. In the event of a regime change, the new president has little interest in implementing the predecessor’s plans. These are then set aside or not implemented at all.

Basic Problem: America is the most powerful economy in the world. The dollar is the world currency. We cannot put pressure on other countries like we can on America. If enforcement of a contract in the United States fails, the parties generally have no choice but to wait.

How Switzerland will handle the situation remains in question. Make tracks and keep your fists in the bag? Or to defy international pressure? Economics professor Alfred Medler says: “With the minimum tax, you can wait a while until it becomes clear what will happen next. Not much can happen.”

See also  Germany: Green economic miracle - US recession soon?

In principle, however, Switzerland must abide by the international agreements to which it has pledged, says Medler. And for pure selfishness. “Our credibility is a great strength in a turbulent world. It’s no wonder that many international companies are drawn to Switzerland.