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Archive for the category “Switzerland”

Virgin Alpine

He was surprised to discover which nunnery she belonged to.

He was surprised to discover which nunnery she belonged to.

Hamlet’s outburst at Ophelia to ‘get thee to a nunnery’ was intentionally ambiguous. In Elizabethan times a nunnery was either a convent or a brothel. Were the Danish Prince alive today, he could merrily get away with the same line aimed at Switzerland. What happened to the once VIP Escort Agency that, on its way to legitimacy, managed to skip the world’s standard hypocrisy, and within six years achieved a pose of pious humbug. ‘I knew the bride before she was a virgin’ could have been written across the Welcome Hall at Geneva Airport.

There is no need to relate the bawdy history of this mountainous paradise – it will suffice to mention the last century’s safe-haven for the loot of Nazi war criminals, and the recently exposed shenanigans of FIFA, football’s world governing body based in Switzerland (and led by a Swiss citizen – one of the most reviled people in the world not serving time for pedophilia or war crimes).

After telling the US back in 2009 that it would not allow UBS to release records of undeclared bank accounts, now, with all the zeal of the convert,  it is publishing lists of individuals subject to requests for information from other governments.

Switzerland has also joined the OECD’s global transparency initiative, according to which there will be automatic exchange of information without the need for a request from another country. And as for  that bust last month of seven FIFA officials in a Zurich hotel…..

Gentle persuasion

Gentle persuasion

Viewing all this from the comfort and security of my own lily-white country, Switzerland is less the zealous convert, and more the faceless (do you know the name of the Head of State?), small-time con who, when put under the swinging lamp, squeals loud and clear.

I wouldn’t trust Switzerland any further than the next US investigation. A leopard doesn’t change its spots – or at least not so fast. Switzerland is to be avoided, nay evaded, by individuals until such time as it settles down to some form of hypocritical normality like the rest of the world. In the field of corporate tax, on the other hand, where international populism has forced Switzerland into change,  the hypocrisy in offering new incentives to replace the old disgraced ones is Switzerland at its cheekiest best (or worst). Nothing to worry about there (other than the possibility that the rest of the world will get wise to them).

Hero with admirer

Hero with admirer

In the meantime, Switzerland will be feeling just a little more self-righteous – and deserving of the centuries-old honour of providing the Pope’s Swiss Guard.

Maintaining The Berne Rate

Swiss Chocolate Soldiers

Swiss Chocolate Soldiers

Sorry, sorrowful Switzerland. This pious country, which has been supplying the Vatican with its psychedelic army for the last five centuries, has been forced to take heed of the words of Handel’s Messiah (with apologies to Isaiah): ‘Every valley shall be exalted, and every mountain and hill shall be laid low.’ After hundreds of years  where, thanks to the impossible terrain, the Swiss have ‘made watches not war’, the Western World’s  tectonic shift from bang-bang war to economic war (other than dealing with the primitives of the Middle East), has seen Switzerland flattened.

Their woes started with an attack on their banking secrecy laws, progressed to the nuking of their financial institutions for dirty dealings, and now, knowing that the game is up, they are undergoing a complete ‘voluntary’ overhaul of their corporate tax system.

Switzerland has been a tax haven for as long as the term has had meaning. The first ever international tax treaty, in 1872, was between Great Britain and the Swiss Canton of Vaud. And it has been all downhill since then.

According to draft legislation published last month by the Swiss Federal Government, all those fun, ring-fenced, foreign-owned companies – mixed, domiciliary, holding, principal, Swiss finance branch – would be phased out by 2029. (Twenty-twenty-nine! There could be another World War by then; in fact, maybe  that is what the Swiss are banking on.)

The Swiss tax situation is precarious

The Swiss tax situation is precarious

Having said that, Switzerland is not about to hike its tax take. That would be tantamount to abseiling down Mont Blanc without a rope. The draft legislation is a potpourri of give-aways marketed by  other – slightly less in-your-face – jurisdictions.

There is going to be a patent box, a notional interest deduction, a step-up on corporate migration, a step-up on transition from one of the old regimes (in 2029), a reduction in Cantonal tax rates,  cancellation of the reviled 1% capital tax (that has a habit of becoming 2%), a participation exemption, unlimited loss carryforward, a modified UK style group relief,  and reduction of net wealth tax.

It is tempting to conclude that the Swiss are following the age-old custom of chucking as much as possible against the wall and then seeing what sticks. It is almost inevitable, in the era of BEPS, that there will be a chiseling away at many of these benefits worldwide. Whatever happens, by going for broke, the Swiss should continue to be one step ahead of  the market.

These are better times for the Swiss watch industry

These are better times for the Swiss watch industry

On the other hand, it is definitely time for Switzerland to expand its non-financial sector. Despite the ubiquitousness of the cheap quartz watch over the last 40 years, the Swiss have reinvented the market for the quality precision piece. Time may be on their side after all.

Foul!

Sir Tom Finney not looking very illiterate

Sir Tom Finney not looking very illiterate

“I fail to understand why any of you would be interested in twenty-two illiterate young men kicking an inflated pig’s bladder around an oblong of grass.” A bible-bashing preacher doing the rounds of Lancashire’s pubs in late-Victorian England? Not quite. Actually, the headmaster of my school (see previous post) in mid- 1973 berating a hodgepodge of gormless fifth-formers for bunking off  around the corner to the Hendon Hall Hotel to see the England team.

For those of you not acquainted with sophisticated evenings of lager and lime  at  the irrevocably stained bar of  that  starless Inn, whenever there was a game at Wembley (if you don’t know what Wembley is, this Post is not for you) one team stayed at the Hendon Hall and the other at the Brent Bridge. Knee-high to a grasshopper, I had accompanied my Dad there seven years earlier, and watched transfixed as Charlton, Hurst, Moore and pals passed within tackling distance of where I was standing.

D Day plus 22 years

D Day plus 22 years

A day later Moore was raising the Jules Rimet trophy, his team having shown the Hun good and proper  for the third time that century who really ruled Europe. (On the first two occasions, victory had not required a disputed goal from Geoff Hurst but did involve an American front line).  Of course, in 1973 the England players were gloriously on their way to not qualifying for the Finals, let alone the Final. But then, there only ever was one real World Cup Final.

As the 2014 Brazil World Cup approached, everyone seemed a little too preoccupied to pay much attention to it. The press was taking  far more interest in what was waiting  in store for football fans in 2022. I could not begin to understand why people were so shocked at the Sunday Times expose of the alleged corruption that bought Qatar the hosting of the competition. Now, I am a fairly ambivalent football fan. I was born with two left (very flat) feet, a left head and a left eye-for-the-ball. But even I know that, when you have an entire planet to choose from for staging the most important competition in the game’s calendar, you do not go for a country where (1)there is no beer (2) there is no grass and (3) there is no thermostat. Not unless, of course, there is money in it.

In the meantime, the almost octogenarian Septic Bladder, who has presided over the FIFA shenanigans since 1998 is well placed to be elected to a fifth term as President at the special Congress to be held next year. It turns out that the 209 member nations  have an equal vote so, similar to that other den of iniquity – the United Nations, the mice can rule the house.

Various ideas have been mooted for solving the problem including, curiously, asking Switzerland (the home of FIFA) to revoke its tax-free-not-for-profit status. While I recite 15 times every morning: “tax makes the world go round”, I fail to understand how this will solve anything other than forcing the national leagues to fork out more spondoolies.

The Queen's grandson-in-law looks like he could sort out Septic Bladder

The Queen’s grandson-in-law looks like he could sort out Septic Bladder

It would seem to make much more sense for the wealthy leagues and nations to insist on “one dollar one vote” , which would relegate all those runty little nations to the sidelines. In addition, similar to nations for whom democracy is not a foregone conclusion, there could be election observers. In this case, it would not have to include that gratingly annoying failed president, Jimmy (pronounced ‘Jimmuh’ ) Carter, but perhaps a group of people from another sport. Given the scandals in Cricket (‘You know, it just isn’t Cricket”) maybe they should go for Rugby (albeit, itself not with lillywhite hands). With Football traditionally a game for gentlemen played by thugs and Rugby a game for thugs played by gentlemen, they could bring in some of the Hooray-Henrys to clean things up. Even the Queen’s (there is only one Queen) granddaughter is married to a Rugger Player. And, if FIFA didn’t play the game, who could be better placed to put the boot in.

I hope it is not too late to send Qatar packing. FIFA could be reminded that there is one country that has proved itself in the last two years supremely capable of organizing a major international sporting event while having plenty of world-class football stadiums ready and waiting. And, no, I do not mean Russia. They have already bought the 2018 extravaganza to sit side-by-side on Putin’s sideboard with the Sochi Winter Olympics (Sochi, like Qatar, is short on snow). Ambivalent fan or not, in mid-July 2022 I hope to be standing outside the Hendon Hall Hotel.

 

Is the clock ticking for Switzerland?

Class?

Class?

Towards the end of 2010, in one of his last interviews, John F Kennedy’s iconic speechwriter, Ted Sorensen, shared a previously unpublicized titbit concerning the 1960 Presidential Election. At 3am on Election Night, Richard Nixon gave a not-exactly- concession speech (he officially conceded the following afternoon). Watching the event on TV, Kennedy turned to Sorensen and said, with a touch of  sarcasm: “That’s Nixon. No Class”.

Ever since I learnt to think independently (which is a lot more recently than I care to admit) the word “Class” has given me trouble. It is no coincidence that the only acceptable opposite of “Class” is “No Class” often modified by one of several expletives. Despite gargantuan efforts by modern lexicographers to come up with a good definition, the Shorter OED lists 7 homonyms for the word, none of which have anything to do with what Kennedy was talking about.

Part of the problem has been that the term has  been a moving target for so long. While a dinner jacketed Sean Connery’s request for a certain drink “shaken not stirred” may have been the height of class (aka elegance) 50 years ago, nowadays every western 17-year-old lying face down in the street can reel off a catalogue of cocktails and chasers.

However, one thing that all tax practitioners would agree  is that , whatever “Class” is, the Swiss have it.

She was a Grimaldi

She was a Grimaldi

Throughout the 20th century and into the 21st, Switzerland has been the ultimate tax haven for the discerning company or individual. The Rolls Royce Phantom II of the international tax avoidance (NEVER evasion) industry. Not for them the vulgarity of Netherland Antilles or British Virgin Islands. While Monaco may offer the attractions of the Grand Prix, Monte Carlo’s Casino and the glamorous House of Grimaldi, Switzerland offers supreme natural beauty, elegant manners and the ever-so sacred discretion of professionals you would trust in a harem.

Even as it was  mauled by the Americans for aiding and abetting tax dodgers, the country kept its head high and suffered no apparent reputational damage (after all, that is what everyone knows they have always done. It was the Americans who came over as brash). However, recently it has started to look as if paradise could be lost, not because of external pressures (which have been there forever) but, rather, internal ones. The Swiss (or to be more precise 103,000 of them who signed a recent petition) have discovered they have a social conscience – and, with that, there (potentially) goes the tax haven neighbourhood.

Riled by the cosy tax arrangements of such class acts as  Phil “A groovy kind of love”  Collins and Tina “I’m your private dancer” Turner, a socialist  group is forcing a referendum on Switzerland’s Federal lump-sum taxation regime. This move, itself, comes in the wake of the discontinuance of the regime by several Cantons.

Switzerland has been operating some form of lump-sum taxation for 150 years. The basic idea is that foreign High Net Worth individuals wanting to establish a tax residency of convenience in Switzerland and not planning working or doing business there, can negotiate a level of tax ostensibly based on their cost of living. This has traditionally replaced income tax and wealth tax.

Recognizing the winds of change in public attitudes the Federal Government issued a draft law in late September amending the existing regime. The reaction was a petition organized by a group of lefties (I always thought a radical Swiss was someone who took his jacket off at dinner- but I was clearly wrong) that will ensure a national vote within 2 to 3 years with the aim of scrapping the regime altogether. They, like the Cantons before them, object to the idea of anyone paying tax on an expenses basis.

The proposed changes in the law were, to the plodding residents of progressive taxpaying countries like me, quite minor  although quite possibly volcanic in  Swiss terms (though not volcanic enough for those culturally defective fellow travelers  who have betrayed all that Switzerland stands for).   Currently, lump-sum taxation is available to foreigners and Swiss citizens who have been abroad for over 10 years (the latter only being eligible to one year of the special regime). Under the draft law, Swiss citizens are eliminated (not literally).

Setting a minimum for lump-sum taxation was a moral imperative

Setting a minimum for lump-sum taxation was a moral imperative

The draft law  clarifies that the tax is based on the cost of living in Switzerland and abroad, whereas it had been previously unclear as to whether only Switzerland was included. This has to be one of the best pieces of tax haven doublespeak in decades and, if they were not Swiss, I would congratulate them on a good joke, well told.  The cost of living on which the tax is based bears no relation to the cost of living in Switzerland, abroad or, for that matter, in outer space. It is, in practice, calculated mechanically as a multiplier (currently 5, proposed 7) of the rent paid by the taxpayer or the rental value of an owned home. The proposed law does for the first time  include a minimum CHF 400,000 (around $425,000) in case any HNW individual was saving tax by shacking up in a youth hostel.

The question on everybody’s lips is “What will fall next?”. Can we expect Principal and Mixed Company rulings to be toppled? Will IP be returned home? Will Stand-up comedians miraculously stand up on Lake Geneva?

What a spoilsport

What a spoil sport

But the big question is whether the country can still lay claim to  “Class”, which has always been the backdrop to its discrete financial industry,  when it publicly expresses self-doubt and is inhabited by at least 103,000 whingeing reds disturbing its rigid norms? For what it is worth, my take on “Class” is that it is a cheap veneer of elegant superiority that has gradually been chipped away by all those inconvenient social pioneers- totally lacking in sartorial elegance -variously disguised in suffragettes’ skirts, cloth caps, loin-cloths, bushy beards and open sandals who, for well over a century, have been breaking down the walls of inequality in society. God bless them. Even James Bond, the product of a Swiss mother and Scottish father, is a little rough round the edges in his latest incarnation. Perhaps Switzerland is finally coming down from the mountain.

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