Like cheese in butter: Switzerland decided not to deprive billionaires of big money
Switzerland voted against the introduction of a 50% inheritance tax for the super-rich after wealthy citizens threatened to leave the confederation. According to the plan of the authorities, the tax was to be levied on all assets exceeding 50 million francs ($ 62 million), which are inherited or donated. At the same time, some rich people have already emigrated. Details can be found in the Izvestia article.
All for the referendum
A referendum on two legislative initiatives was held in Switzerland. The first concerned the replacement of compulsory military service for men only by the service of all citizens. The second is the introduction of a 50 percent inheritance tax and donations of over 50 million francs ($62 million).
The citizens of the country rejected both proposals. 84% of Swiss opposed the first initiative proposed by the center—left coalition, while 78% opposed the second. The authors of the second bill were the "Young Socialists", who proposed to direct the proceeds from the tax to combat the effects of climate change. According to the initiators of the plan, Switzerland could achieve the goal of reducing greenhouse gas emissions to zero by 2050.
Wealthy Swiss have threatened to leave the country if the bill is passed. Among them is Peter Spuhler, the main shareholder and former CEO of the railway carriage manufacturer Stadler Rail, whose fortune is estimated at $4.6 billion. He stated that because of the tax, the company would have to be sold after his death.
The bill would have affected the interests of about 2.5 thousand people in total. The plan was strongly rejected by the government and all parties except the left. They were afraid that rich citizens, having left Switzerland, would have nullified all income and would have emptied the state treasury.
"The voters unequivocally rejected the risky experiment in fiscal policy. Such a tax would upset the balance of our tax system and undermine the attractiveness of Switzerland," Finance Minister Karin Keller-Sutter commented on the results of the plebiscite.
It's time to go
Co-owner of Pictet Bank & Renaud de Planta, Cie and member of the Board of the National (Central) Bank of Switzerland, has already changed the tax jurisdiction from Swiss to Italian. Rome introduced a preferential fixed taxation regime for wealthy foreigners eight years ago.
According to Jurg Niederbacher, a specialist from the Swiss consulting and auditing company PwC Schweiz, they also have clients who left Switzerland for the same reason. "The inheritance tax initiative has forced some wealthy individuals to explore alternative options and look to other jurisdictions. They came to the conclusion that due to the current tax legislation, including the capital tax, Switzerland is not always more profitable than other countries now," he believes.
Competitors are breathing down your back
According to Bloomberg, in a country where the wealth tax already applies, there are nine or more billionaires per million inhabitants, which is five times higher than the average in Western Europe. In addition, Switzerland has a special law for foreigners that allows them to pay taxes without fully disclosing information about their property.
Plebiscites in Switzerland are held up to four times a year, according to the principles of direct democracy. Citizens of the state have repeatedly sided with businessmen. For example, they voted against the introduction of a national minimum wage and an increase in mandatory vacation days.
Switzerland values its reputation as a country with a banking system focused on high-income clients. Recently, the fiscal policy of some cantons has been challenged by competition from other centers in Asia and the Middle East.
A balanced system
Natalia Eremina, a professor at St. Petersburg State University, notes in a conversation with Izvestia that such processes occur mainly in European countries.
— This issue is becoming relevant in the political agenda and economic life. In fact, it leads to an exodus of people with large capital, and does not solve the problem of social and economic imbalances," the political scientist believes.
According to her, for a long time Switzerland had a fairly balanced system that allowed solving many social issues.
— There are quite high taxes and a significant tax burden on large entrepreneurs, owners of large assets, and so on. But the situation has changed, new tasks and threats have arisen, the migration burden has increased, and following this, the tasks regarding social funds have increased," the specialist is sure.
Such taxes can lead to a loss of domestic investment, the expert believes.
"After all, paying even half of the asset's value can lead to the undermining of the company itself, because the money will have to be taken from the property, then there will be no money for investments," the analyst believes.
According to her, the Swiss do not have to wait for funds from abroad.
— Switzerland has lost its status as a "safe haven", its attractiveness has decreased due to the history of the disclosure of these assets of Russian holders, the Chinese are also very skeptical about Switzerland in this context, - concluded the analyst.
Andrea Opel, a professor of tax law at the University of Lucerne, believes that the current plebiscite has not shaken the trust of wealthy citizens in Switzerland.
— In a country, the rules do not change overnight by the decision of the government — it is always the decision of the people. Such a clear and precise outcome of the vote was an important signal: there is no need to be afraid. Switzerland has been and remains a predictable and stable country in the legal field," the expert concluded.
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