Switzerland has amended the “too large to fail” legislation to reduce the tax burden in some banks.
The Swiss Federal Council requested the Federal Department of Finance to prepare a draft consultation document on changes to the position of participations in the deductions TBTF legislation. He noted that the proposed reform would “not allow the tax load of the leading holdings of systemically important banks from raising together with the conditional issuance of convertible securities (CoCos), written off bonds and bail bonds.”
The Federal Council has proposed that the interest payments on cocos, decommissioned bail bonds and bonds, were not taken into account when calculating the deduction.
In accordance with current regulations, the deduction is reduced, because the interest in cocos, written off bonds and bail bonds, regarded as financing costs. The Federal Council said: “The deduction – a system associated with the current legislation, ie all interest on debt capital lead to a reduction in the gross income of all corporations and cooperatives This can lead to a higher tax burden.”.
The Federal Council said that some banks are required by supervisory law circulate such financial instruments, and that the issue should be carried out through the top of the holding company created by the banking group in Switzerland, he said.
According to the Federal Council, the proposed reform “will ensure that the accumulation of capital by banks has progressed faster than that appropriate for the purpose TBTF legislation.”