Bank fines not tax deductible, cabinet decides

Criminal fines imposed on corporations should not be tax deductible, but tax rebates could be claimed on illegally gained profits that a court has ordered a company to pay back, the Swiss government advised on Friday.

The cabinet was responding to a parliamentary motion to clarify the situation in light of a CHF2.6 billion ($2.8 billion) fine imposed by the United States on Credit Suisse bank earlier this year for the part it played in tax evasion offences.

The suspicion that the bank might try to claim tax expenses against the fine raised political hackles, prompting the motion from centre-left Social Democrat parliamentarian Susanne Leutenegger Oberholzer.

In June, parliament ordered the government to give its opinion and recommendations on the issue.

“The deductibility of such fines under tax law would reduce the punitive effect of the fines. The burden of the ensuing tax reduction would indirectly have to be shared by taxpayers, which is inconsistent with the purpose of a fine,” read a government statement issued on Friday.

However, the so-called "disgorgement" of illegally obtained profits should be treated differently, the cabinet added. “As their purpose is not punitive, they constitute business-related expenses,” the statement read.

The cabinet said it would be necessary to update Swiss corporate laws to draw a clear legal distinction about what constitutes a proper business related expense.