Genevas bankers are concerned that Socialist Party proposals to scrap a 150-year-old 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.
Its 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. Its 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 of 21 analysts by Bloomberg News.
System Expands
