Wednesday, April 04, 2007

Tax Exiles Flock To Switzerland

By Swiss Info

Ultra-rich foreigners are flocking to Switzerland in increasing numbers to take advantage of controversial lump sum tax arrangements offered by many cantons.

The number of tax exiles reached 4,175 last year up from 2,394 in 2003, according to a survey by consultancy group KPMG. The policy has attracted critics both within and outside the country.

Earlier this year a spokesman for French Socialist presidential candidate Ségolène Royal accused Switzerland of "banditry" after Johnny Hallyday, a French rock star, announced he would switch residency for tax purposes.

Hallyday will join a growing list of multi-millionaire celebrities and business leaders moving to Switzerland, including musicians Tina Turner and Phil Collins, former Formula One driver Michael Schumacher and Ikea founder Ingvar Kamprad.

Swiss tabloid newspaper Blick questioned why Hallyday would pay SFr300,000 ($246,000) in taxes by special arrangement while Swiss tennis ace Roger Federer has to pay SFr3 million – despite both earning around SFr10 million.

Such rich foreigners avoid paying tax on their total wealth and usually contribute a lump sum based on five times the rental value of their Swiss property instead.

However, KPMG partner Patrick Burgy disputed the popular belief that wealthy foreigners do not contribute to Swiss society.

KPMG estimates that Swiss tax coffers benefited to the tune of up to SFr600 million in 2004, a figure that probably nudged SFr1 billion last year also accounting for social security payments and tax revenues on interest earned in Swiss banks.

Challenging perceptions

"The general perception is that lump sum tax payers have too good a deal and are not paying their fair share," Burgy told swissinfo.

"But our calculations show that these people are paying the same amount on average as the average Swiss tax payer who earns more than SFr200,000.

"What people also forget is that any income they derive from foreign sources, such as a concert staged in Japan, is also subject to withholding tax in that country. So the lump sum payment in Switzerland is often only half the story."

KPMG also revealed that wealthy foreigners in canton Valais in western Switzerland contribute 5.2 per cent of the total tax collection despite making up only 0.6 per cent of the local population. In six of Switzerland's 26 cantons, rich foreigners contributed at least two per cent to the local tax purse in 2004.

But this argument does not wash with the centre-left Social Democrat Party, which is campaigning to bring a halt to the practice.

"We are against lump sum taxation because it is not just and is in breach of the constitution. According to the constitution all citizens should be treated equally and taxed according to their ability to pay," Social Democrat spokeswoman Claudine Godat told swissinfo.

"We are not sure if the figures in the [KPMG] report are accurate [regarding the numbers of lump sum payers]. But if they are correct, then it is indeed worrying."

1 comment:

harish said...

THE French like to tell rude jokes about Belgians, but this time the laugh is on them. To escape their punitive tax regime, the Gallic elite are fleeing to the flat country mocked in France for its dismal weather and enjoyment of chips.
“Boring Brussels” is the bolthole of choice for French tax exiles, and Belgium is laughing all the way to the bank. Having flown the draconian French tax coop, well-endowed industrialists are helping to balance Belgian
books with their taxes.

“It means less money for the French government,” said Claude Taittinger of the champagne-making family, who blamed a wealth tax introduced in 1981 by François Mitterrand, the late Socialist president, for forcing his family to sell out to an American hotel chain.

The Halleys, of the Carrefour supermarket chain, have also settled in Belgium, joining such pillars of the French Establishment as Philippe Jaffré, former head of Elf Aquitaine, the state oil company.

The French Who’s Who of fiscal exiles includes the singers Charles Aznavour and Patricia Kaas; the actresses Emmanuelle Béart and Isabelle Adjani; and the tennis player Amélie Mauresmo, who are resident for tax purposes in
Switzerland.For more on the subject visit one of my known links:Web design company
For the Taittingers, the last straw came when, instead of following the EU trend of cutting wealth tax, France held to its revolutionary creed of égalité and fraternité to abolish a cap that until 1997 had limited the amount of tax a person could pay to 85% of their income.

For members of the champagne clan who were also paying the solidarity tax on wealth”, which targets those with assets above £500,000 regardless of earnings, it meant an annual tax bill greater than their income. “Some members of the family had to sell shares in the company each year just to pay their tax bills,” said Claude Taittinger. “It was unbearable.”

Some of the family moved to Switzerland and Britain. Jean Taittinger, who like Claude is a son of Pierre Taittinger, the company’s founder, went with
his family to Belgium.

Jokes aside — French humour has traditionally cast the Belgians in the role reserved by snobby Britons for the Irish — Belgium has the advantage of speaking French and being only 85 minutes from Paris by train; and although its tax rate of 53.5% on income above £26,200 is higher than Britain’s, it
does not impose a wealth tax.