Tax hikes for rich expats in Switzerland rejected

Switzerland's government on Friday rejected calls to axe special rules allowing rich foreigners resident in the country to pay less tax, saying the current system still raised crucial revenue.

Tax hikes for rich expats in Switzerland rejected
Bern's parliament building. Photo: OFCL

In a statement, the government said it had rejected demands by leftwing parties and trade unions on the grounds that existing system generates 668 million Swiss francs (€539 million, $705 million) in taxes.

It also underlined that the current rules were in any case set to be adapted from 2016 to raise the tax take.

The government insisted that was a decent compromise between fairness and Switzerland's draw as a financial hub.

Currently, foreigners on Switzerland's rich list can opt to pay a lump sum to the local tax service, with their spending, rather than income, being used to gauge their wealth.

The new rules are set to expand what is considered taxable for the super-rich, and will apply in 2016 to anyone who moves to the country as of 2014.

Those who already live in Switzerland will be allowed a grace period, up to 2020, before the new regulations apply to them.

Around 5,000 people benefit from the current system, which tax experts say is only of value to individuals whose wealth exceeds 3.7 million Swiss francs.

The campaign against the rules has been boosted by the fact that a handful of Switzerland's 26 cantons have already decided to abolish their lump-sum rules outright or have toughened the criteria.

The government's refusal to abolish the system is not the final word on the issue, however.

It was forced to make a decision because opponents of the lump-sum rules launched a citizens' petition, a cornerstone of Switzerland's celebrated system of direct democracy.

Having gathered the required 100,000 signatures from the public, the campaigners have already opened the road to a referendum within the next two to three years.

Among the best-known beneficiaries of the lump-sum system is Swede Ingvar Kamprad, founder of the global home furnishings giant Ikea.

He has been ranked by Swiss business magazine Bilan as Switzerland's richest man, with a net worth of up to 39 billion francs.

Ikea has insisted that the sum mistakenly attributes to Kamprad personally the value of the unlisted, family-owned group, which has a complex ownership structure through several foundations.

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