Overwhelming No at the Ballot Box
By: Alexis Munier
Swiss Voters Reject Move to Eliminate Flat-Tax Rate
A strong majority of Swiss voters – 59.2 % – rejected a proposal to end lump-sum tax payments for wealthy foreigners in late 2014. Those numbers were even higher here in the Obersimmental-Saanen district, with 87.8% of Saanen voters, 90% of Lauenen voters, and a staggering 93% of Gsteig voters rejecting the measure.
Finance Minister Eveline Widmer-Schlumpf, a vocal opponent of the referendum, expressed relief at the results. The ability for each canton to decide on its own whether to offer the fiscal packages ensures that the federalist traditions of Switzerland will continue to thrive.
Saanenland City Council President Aldo Kropf, who refrained from taking a personal stance either for or against the measure, still had this to say: “The large voter turnout and high percentage of votes against the measure showed how important this was for the people of Saanen.”
Sigh of Relief In the Saanenland
The no vote, which continues to allow flat-tax or lump-sum arrangements for wealthy foreigners provided they do not work within Swiss borders or earn any income in the country, comes as no surprise in resort villages, where much of the local population makes a living in the hospitality and services industry.
“I don’t have the luxury of taking a moral stance,” says one local handyman who is employed by a family established in Gstaad for fiscal reasons. “If the tax regime ends, I’ll be out of a job.”
While the measure didn’t pass, the Federal Council had already agreed beforehand to implement several tightenings of the tax regime. Currently, the rate is calculated at five times the cost of living, but in 2016 that figure will be raised to seven.
Tax Evasion or Tax Heaven?
The referendum generated heated debate, with citizens left to ponder several aspects of their economic and financial policies. The initiative’s leaders, a left-wing group that included the support of the Socialist party, urged voters to take a moral stance against tax evasion. A key argument was that the policies were unfair to monied Swiss nationals as well, as only foreigners may benefit from lump-sum arrangements.
External pressure for the vote came not just from the far left, but from the OECD, Organisation for Economic Development, which equates the regime with tax evasion. Five cantons including Zürich, Basel-Stadt, Basel-Landschaft, Schaffhausen and Appenzell-Ausserrhoden have also abolished the regime in recent years.
As a result, more than half of Zurich’s wealthy beneficiaries have left the canton – some choosing to relocate to other tax-friendly nations like Belgium or Luxembourg, and the others, notably Russian Viktor Vekselberg, relocating to Canton Zug, where he is privy to another fiscally advantageous arrangement.
Who Really Benefits
The flat-tax was originally established in the 1800s to benefit from wealthy English retirées who settled along Lake Geneva.
Records from 2012 show less than 6,000 foreigners benefit from the lump-sum tax regime, which brings approximately CHF 695m into the cantonal coffers each year. The biggest argument to continuing the regime was not this sum itself, but the amount of money these individuals spend on services and products here. A Federal Council study commissioned for the referendum showed they contributed over CHF 1bn each year to the Swiss economy, with the ensuing VAT directly adding another estimated CHF 75m in revenues. This study was disputed by the opposing side, with Le Monde and other media outlets calling into question what they deemed an outdated and erroneous study.
Among much commentary in the media, State Senator Christian Levrat mentioned Gstaad as a specific example of the harmful effects of rich expatriates in Alpine resorts.
“What advantage does Gstaad take from these luxury chalets which sit empty a good part of the year?” Levrat was quoted on swissinfo.ch. “The super-rich spend hardly anything; they only serve to raise rents for local residents, who pay a high price for this unreasonable development.”
All’s Well That Ends Well
Levrat’s arguments aside, the lump-sum regime remains safe and sound. Switzerland – and the Saanenland in particular – will continue to remain a fiscal paradise for the world’s wealthiest for some time to come.