Swiss bankers bat­tle so­cial­ists to keep tax breaks

The Pak Banker - - Front Page -

GENEVA

The Swiss bankers are con­cerned that So­cial­ist Party pro­pos­als to scrap a 150-yearold tax break for wealthy for­eign­ers will scare off their best clients.

Their anx­i­ety in­creased last month with the sub­mis­sion of a na­tional pe­ti­tion to abol­ish the so-called for­fait, an ex­pen­di­ture-based levy for­eign­ers ne­go­ti­ate with Swiss can­tons to avoid pay­ing in­come tax. Ap­pen­zell Ausser­rho­den will be­come the third can­ton to re­ject the sys­tem on Jan. 1 and Basel will fol­low 12 months later.

“It’s an out­rage that or­di­nary peo­ple should pay more tax than rich movie stars, singers and sport­ing celebri­ties,” said Ro­main de Sainte Marie, pres­i­dent of the Geneva So­cial­ist Party. “It’s a form of tax eva­sion.”

The Swiss back­lash against the for­fait comes as a slow­ing econ­omy high­lights the lower tax rates paid by su­per-rich for­eign­ers such as Ikea bil­lion­aire founder Ing­var Kam­prad. While the So­cial­ist Party says the tax loop­hole has turned Geneva into a city of lux­ury bou­tiques and un­af­ford­able hous­ing, bankers counter that rich ex­pa­tri­ates are key clients who cre­ate jobs and stim­u­late growth.

“We need to de­fend it for our own sakes as this is a very in­ter­est­ing cus­tomer base,” said Gre­goire Bordier, pres­i­dent of the Geneva Pri­vate Bankers As­so­ci­a­tion. “This sys­tem al­ready brings sig­nif­i­cant rev­enue to the au­thor­i­ties.”

The tax regime in Geneva raised 116.4 mil­lion francs ($123 mil­lion) for the can­ton in 2010, ac­cord­ing to a study by Zurich- based Economiesu­isse. The fig­ure for Switzer­land was 464.2 mil­lion francs, or 0.9 per­cent of to­tal tax rev­enue. The econ­omy will grow 0.9 per­cent this year af­ter ex­pand­ing by 1.9 per­cent in 2011, ac­cord­ing to a sur­vey. The num­ber of for­eign­ers tap­ping the for­fait climbed 31 per­cent to 5,445 be­tween 2006 and 2010, ac­cord­ing to fig­ures from a body rep­re­sent­ing the fi­nance di­rec­tors of the coun­try’s 26 can­tons. The tax plan was in­tro­duced in 1862 by the can­ton of Vaud to get wealthy British res­i­dents to pay for lo­cal ser­vices.

Af­flu­ent for­faits, who paid an av­er­age 122,681 francs of tax in 2010, also sup­port con­struc­tion and other in­dus­tries, said Bordier, who is also a manag­ing part­ner at pri­vate bank, Bordier & Cie.

House prices in Geneva al­most tripled over the past decade with an av­er­age trans­ac­tion price of 2.13 mil­lion francs in the third quar­ter, ac­cord­ing to Wuest & Part­ner, a real es­tate con­sult­ing firm with of­fices in Geneva and Zurich.

“In the be­gin­ning, you could say they in­creased prop­erty prices,” said Bordier. “Now, as prices de­cline, you could say they’re sup­port­ing the mar­ket.” Those ar­gu­ments don’t per­suade Geneva’s So­cial­ist Party, which sub­mit­ted the 10,000 sig­na­tures in Jan­uary to prompt a vote on the sys­tem. That ref­er­en­dum may come in 2014, ac­cord­ing to Ar­naud Mor­eil­lon, sec­re­tary-gen­eral of the party in Geneva.

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