Swiss reject millionaire inheritance tax fearing wealth exodus

GENEVA - Switzerland voted to reject a 50 per cent inheritance tax on super-rich residents after wealthy entrepreneurs threatened to leave the country.

The plan was opposed by 78.3 per cent of the electorate, according to government data on Nov 30. Polls ahead of the plebiscite had suggested such an outcome. With turnout at 43 per cent, the measure didn’t achieve a majority in a single canton.

“Voters have clearly rejected a risky fiscal policy experiment,” Finance Minister Karin Keller-Sutter said. “Such a tax would have thrown our tax system out of balance and would have damaged Switzerland’s attractiveness.”

The left-wing Young Socialists group launched the proposal as a way of raising funds to fight climate change. The levy would have been introduced on all assets exceeding 50 million francs (S$80 million), which an individual passes on or gifts. That would have hit some 2,500 people in Switzerland – the top 0.03 per cent of the population.

The plan ran into staunch opposition from the government and all parties aside from the left. They argued that the tax risked the departure of wealthy people, offsetting any proceeds and leaving fiscal coffers worse off. 

Stadler Rail AG top shareholder Peter Spuhler was among the rich entrepreneurs who said he’d emigrate should the measure pass, telling local media that the levy would force his company to be sold in case of his death.

Switzerland – which already has wealth taxes – has more than nine billionaires per million inhabitants, five times the average in western Europe, according to a UBS study. It also has special provisions for well-heeled foreigners that allows them to pay taxes without fully disclosing what they own. The fiscal benefits from such resident millionaires are likely to have swayed voters in Sunday’s ballot.

Ms Keller-Sutter said on Nov 30 that when the inheritance tax proposal was first debated in public, she received warnings from “a number” of local officials – in particular from central Switzerland – that wealthy inhabitants were considering moving away. That region around Lake Lucerne is considered a hot spot for the rich.

The rejection eases some concerns that the country’s status as one of the world’s top places for the wealthy may be slipping. The reputation – nurtured by the high-net-worth focus of its banking industry and the fiscal policies of some cantons – is being tested by competition from other centers in Asia and the Middle East.

Swiss citizens – who vote in plebiscites as many as four times a year under the country’s direct-democracy rules – have repeatedly sided with business interests. In past years they rejected measures on stricter emission limits, more mandatory vacation days and a national minimum wage.

Local voters in the canton of Fribourg on Nov 30 also followed that trend, with 53.5 per cent rejecting a plan to make a salary of at least 23 francs per hour mandatory there. 

In a separate national ballot, voters decided that service in the Swiss army should remain mandatory only for men.

The proposal by a center-left coalition aimed to extend the duty to women, while enabling anyone to fulfill the obligation also by civilian service like caring for the elderly or environmental work. The plan garnered just 15.9 per cent support. BLOOMBERG