Bern: Switzerland approved an overhaul of the corporate tax code, choosing to stay an attractive base for companies like Procter & Gamble, Vitol SA and Caterpillar Inc. even at the expense of a short-term drop in fiscal revenue.

Voters supported the change, according to an initial projection published by Swiss television SRF. A poll by gfs.bern had suggested it would pass by a narrow margin.

The outcome, which ends years of wrangling and a failed attempt at an overhaul two years ago, ensures Switzerland remains a low tax domicile for companies and still is compliant with international rules. The new system will consist of deductions on profit from patents and R&D expenses, to make up for having to get rid of the breaks now accorded multinationals. That’s because they no longer are in line with Organisation for Economic Cooperation and Development rules.

A failure to pass the reform could have sparked an exodus of firms to low-tax locales like Ireland or Singapore because in Switzerland they would’ve been taxed at the same rate as local companies - which in Geneva is currently as high as 24.16 per cent.

That could have been devastating for the economy. Multinationals generate about a quarter of employment and a third of gross domestic product, according to a study by McKinsey and industry group SwissHoldings. They also responsible for a big chunk of the federal government’s revenue from taxing firms’ profits.

Yet even with these moves, the rates multinationals pay - which get negotiated on an individual basis and aren’t publicly disclosed - may rise. A SwissHoldings survey of its members found that roughly a quarter expect to pay a rate more than 15 per cent higher than today as a result of the changes, while about half foresee a 5 to 15 per cent rise in their tax bill.

Still, they’d be charged even more in neighbouring France or Germany.

Although officials have argued the reform is essential for Switzerland not to lose out in the global competition for businesses, in the short-term it will still cause a drop in tax income of about 2 billion francs ($2 billion, Dh7.34 billion)) a year.

In a separate referendum, the Swiss also backed new restrictions on semi-automatic firearms.