Swiss law may be changing. Laws that allow the infamous “tax shelters” that rich foreigners enjoy are up for a vote:
For decades, the rich who had been overtaxed in their own countries have been flocking to Switzerland to take advantage of fiscal perks most of its 26 cantons (equivalent of the U.S. states) are offering to well-heeled expats. But if a left-wing political alliance has its way, rich foreigners may soon have to start contributing a lot more money into their host country’s coffers.
Unlike Swiss citizens, who pay taxes not only on their income but also on their assets, wealthy foreigners can negotiate lump-sum taxation, a figure based on five times the rental value of their Swiss property. To qualify for the flat-rate tax deal, they are not allowed to work in the country but must have a net wealth of at least $2 million.
This system has attracted more than 5,000 affluent expatriates to this nation of only 8 million people, including singers Tina Turner, Phil Collins and Shania Twain; actress Sophia Loren; as well as Ikea’s founder Ingvar Kamprad. Although wealthy foreigners collectively shell out about $700 million in federal and local taxes, they save millions that they’d have to pay in their home countries.
But this arrangement may soon be a thing of the past. Taking advantage of Switzerland’s system of direct democracy, under which citizens can bring any issue up for a vote if they collect enough signatures on a petition, several organizations are now demanding the end of tax breaks for rich foreigners. “The lump-sum system undermines tax justice and goes against legal equality for all citizens,” Niklaus Scherr of the Alternative List, a socialist party and one of the groups behind the initiative, told a Swiss news service.