Switzerland proposes scrapping some corporate tax breaks

ZURICH, Sept 22 (Reuters) - Switzerland unveiled proposals on Monday to scrap certain tax breaks for foreign multinational companies but also recommended measures to ensure the country remains an attractive place to invest.

Switzerland allows its cantons, or states, to compete for multinationals' business by taxing their foreign profits at a lower rate than domestic earnings, a practice known as "ring fencing."

Under the proposals, these so-called cantonal tax privileges would be abolished in favour of new measures that are in line with international standards, Switzerland's Federal Council said in a statement.

Low tax regimes such as in Switzerland or Ireland (Other OTC: IRLD - news) have been in the spotlight for allowing large multinational companies to reduce their tax bills.

But last week the Organisation for Economic Cooperation and Development (OECD) set out a series of measures that, if implemented, could stop companies from employing many commonly-used practices to shift profits into low-tax countries.

Swiss Finance Minister Eveline Widmer-Schlumpf said Switzerland should be able to introduce targeted capital tax reductions to remain attractive for companies.

She said the new measures included a proposed "license box" or royalty box that would allow income from intellectual property to be taxed at lower rates.

Luxembourg, Belgium, Cyprus and Britain already use this mechanism. German Finance Minister Wolfgang Schaeuble said last week Germany would consider granting tax breaks to companies for income generated from patented or licensed research if they were part of uniform rules that would prevent unfair competition for foreign investment.

The Swiss government said there would be a consultation period on its corporate tax reform proposals until Jan. 31. Based on the results, it would then draw up a draft law to present to parliament. (Reporting by Alice Baghdjian and Silke Koltrowitz. Editing by Jane Merriman)