Switzerland: Schweizerische Nationalbank : Swiss Say Foreign Millionaires Still Welcome After Vote

Last Updated: 8 December 2014
Article by Alliance Trust Group

Swiss voters refused to give up a 152-year-old tax break for rich foreigners in Geneva and other wealthy areas that the government says helps the economy.

Fifty-nine percent voted against an initiative, sponsored by the Socialist Party, that would have abolished a system allowing foreigners to duck income and wealth taxes by negotiating lump-sum payments with Swiss cantons, the government said yesterday. Two other proposals, on the Swiss National Bank's gold holdings and on immigration limits, also were rejected.

The Swiss government has said abolishing the regime known as the "forfait" would have cut tax receipts and led to job losses as wealthy exiles left Geneva and other French-speaking cantons that are home to most beneficiaries. Four-time Formula 1 champion Sebastian Vettel and Russian billionaire Viktor Vekselberg are among those benefiting from the system.

"This was a very clear rejection of a left-wing, anti-rich initiative," Thierry Boitelle, a lawyer at Geneva law firm Bonnard Lawson, said in a telephone interview. "Wealthy immigrants will feel more welcome after the vote. There could be a couple of hundred people waiting to arrange a forfait in western Switzerland."

Four of the country's five governing parties opposed abolishing the tax break, originally created in 1862 to encourage British expatriates to contribute to local services. More than 5,600 wealthy foreign residents paid 695 million francs ($720 million) through the forfait in 2012, according to government figures.

Switzerland's Allure

There are more than 700 such regimes in Geneva and 1,400 in the neighboring canton of Vaud. Valais, which includes the ski resorts of Verbier and Zermatt, has 1,300, according to the figures. Six of the nation's 26 cantons, including Zurich, have abolished the forfait since 2008 as an economic slowdown triggered a backlash against the lower tax rates paid by rich foreigners.

When Zurich became the first canton to end the tax break in 2009, 97 of its 201 forfait holders left. Those who remained paid 30 million Swiss francs of tax in 2010, 6.3 percent less than the revenue raised from the lump-sum payment in 2008, cantonal figures show.

"I have five clients who were ready to leave if this initiative had passed," Jean-Blaise Eckert, a lawyer with Lenz & Staehelin in Geneva, said yesterday. "We have been exchanging messages and we are all relieved. People have voted to preserve Switzerland's allure."

Luxury Boutiques

The system turned Geneva into a city of luxury boutiques and unaffordable housing at a time when the government is asking Swiss people to contribute more to the public finances, the local Socialist Party said before the vote.

"I'm disappointed," Romain de Sainte Marie, president of the Geneva Socialist Party, said by phone yesterday, adding that he's still thinking of ways to demand more tax from wealthy foreigners to help bolster the canton's income.

Geneva has 74,300 millionaires, the greatest concentration of any city, according to Johannesburg-based New World Wealth.

Forfait holders in Geneva paid 169 million francs in taxes in 2012, according to the city's Chamber of Commerce, Industry and Services. That included 54 million francs raised from inheritance tax and charitable donations.

The system creates 3,000 jobs in the canton, with a total of 22,000 across Switzerland, according to the chamber of commerce.

'Relief'

"It's a relief for western Switzerland, where many French emigres, among others, settled to reduce their tax bills and avoid the prying eyes of the French state," said Mark Summers, head of Switzerland for Charles Russell Speechlys, a law firm with offices in Geneva and Zurich. "Switzerland is facing tough competition from other international low-tax centers."

The forfait refers to a tax on imputed expenditure that is usually calculated at not less than five times the annual rental value of the individual's home in Switzerland. Forfait holders don't have to declare their worldwide income or assets and, unlike other Swiss residents, they don't pay tax on income from securities' holdings.

Cantons operating a forfait regime will introduce a minimum taxable income of at least 400,000 francs by 2017, to implement a previous federal reform of the system. While regional authorities retain the right to terminate the forfait within their jurisdictions, Geneva opted to keep the system in a separate local vote today.

"The rules are very clear now and this gives us stability and clarity," Pierre Maudet, head of the Geneva cantonal government's economy department, said in a discussion after a press conference at the town hall yesterday. "I'm not convinced the vote on its own will really provoke an influx of forfait holders. There are other significant factors such as schools, law and order and airport access."

National voter participation was 49 percent, according to the Swiss government.

(c) 2014 Yerepouni Daily News. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).

Originally published in 4-traders.

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