Swiss voters have shocked the political establishment by rejecting a reform plan that would have brought the country's corporate tax system into line with international norms.
The tax reforms, which were largely supported by the business community, would have eliminated a number of special low tax privileges that would have prompted many multinational companies to establish themselves in Switzerland.
Experts say the future of the Swiss tax system is unclear. The result of the vote could be a headache for the companies that had opted to implement them and the companies that had been considering moving to the country.
"You don't know what [tax] Measures will be available … This is not a very solid basis for investment decisions, "said Peter Uebelhart, Head of Taxes at KPMG in Switzerland, in a video statement.
Switzerland has been under considerable pressure from the G20 and OECD countries to clean up its tax system in recent years. The country risks being blacklisted by other nations if it does not change its tax system by 2019.
Many voters rejected the tax reform package because they feared that the state's revenue could decline, said Stefan Kuhn, head of corporate tax at KPMG in Switzerland. That could have led to tax increases for the middle class.
The current tax system grants preferential treatment to some companies with large international business. International tax authorities say the rules are tantamount to unfair corporate grants.
Martin Naville, head of the Swiss-American Chamber of Commerce, said it is possible that voters may not have understood the complexity of the reforms. The measures were rejected by 59% of the voters.
"I think it's a very bad day for Switzerland," said Naville. "Sure, the uncertainty and credibility in Switzerland [system] has taken a massive blow. "
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The Swiss authorities say they will act quickly to make a modified tax reform proposal. Naville hopes that new rules will be worked out in the coming months.
"Everyone must now take responsibility for developing an acceptable, competitive tax system and restoring credibility in relation to the famous political stability that has given Switzerland such an advantageous position," he said in a statement.
Naville pointed out that potential tax reforms in the United States and the United Kingdom could induce Swiss companies to relocate, putting pressure on Switzerland's tax base.
CNNMoney (London) First published February 13, 2017: 10:10 ET