Introducing a IP-Licence Box in Switzerland: Quantifying the Effects

Over the last years, the pressure on Switzerland to reform the tax treatment of companies with a special cantonal tax status has increased substantially. One element in the current discussion regarding the reform of the corporate tax system is the introduction of a licence box, in which income from patents, licences and trademarks are taxed at a lower rate. In this paper, we use a computable general equilibrium model to quantify the effects of introducing a licence box and an allowance for excess corporate equity at the cantonal level in Switzerland.General Equilibrium Modeling for the Swiss EconomyThe results reveal that the licence box, combined with a reduction in the cantonal profit tax rate, limits the outflow of the tax base of those companies that are initially subject to the special tax treatment. However, the reduction of the cantonal profit tax rate and the fact that ordinarily taxed companies also benefit from the introduction of the licence box imply overall tax revenues to decrease.