In a national referendum set for November, the people of Switzerland will vote on whether the country should impose a 50% inheritance tax on the wealthiest of people -- under a regimen so harsh that not even surviving spouses would be spared from the rapacious confiscation. Naturally, this is triggering predictions of a mass-exodus of wealthy people, with opponents pointing to a wave of departures the United Kingdom has witnessed in the wake of its own recent wealth-seizure move.
Under the proposal, a 50% federal tax would apply to inheritances and gifts above 50 million francs -- about $63 million. The measure isn't supported by the legislative Federal Assembly nor the executive Federal Council. However, under Swiss law, public proposals must be put to a nationwide plebiscite if 100,000 supporting signatures are collected. The signature campaign was led by Switzerland's Young Socialists.
Reliably sounding like an elementary school group project, under the Young Socialists proposal, the confiscated wealth would be thrown down a woke rathole, with all proceeds used to combat "climate change." While Swiss inheritance taxes at the cantonal level provide an inheritance tax exemption for transfers to spouses and direct descendants, the socialists' proposal for the 50% federal tax would not. Peter Spuhler, 66-year-old owner of steel giant Stadler Rail, decried the proposal as a pending "disaster for Switzerland," estimating the tax would seize upwards of 2 billion Swiss francs
A popular vote for the new inheritance tax on Nov 30 could hammer Switzerland's long-held status as a premier tax haven for the world's wealthiest people. A consortium of opponents that includes centrists and conservatives is already working to dissuade Swiss voters from indulging any impulses to soak the rich. “The brutal 50% inheritance tax threatens the existence of family businesses and causes high economic costs. It’s a setback for everyone,” said the organization in a statement.
In April, a new tax rule took effect in the UK, imposing a 40% inheritance tax on the global assets of "non-doms," a term that refers to residents of the UK who are considered under British law to have their permanent home -- their domicile -- in another country. Chancellor Rachel Reeves is already considering avenues by which the change can be undone, after it promptly triggered an exodus of wealthy people eyeing alternatives like the United Arab Emirates, Italy and, yes, Switzerland. Among those who are either considering departure from the UK or have already done so: Egypt's richest man, Nassef Sawiris, and Indian steel tycoon Lakshmi Mittal, who has lived in the UK for 30 years.
Georgia Fotiou, a lawyer advising private clients at Zurich-based Staiger Law, says the proposal is already harming Switzerland's ability to benefit from the UK's own inheritance-tax folly. “In terms of the chance for Switzerland to attract people leaving the UK, the damage has been done. The timing was terrible,” she told the Financial Times. “It hasn’t stopped everyone from coming but more have chosen Italy, Greece, the United Arab Emirates and elsewhere instead.”
To become law, the proposal must clear two hurdles, garnering not only a majority of support nationwide, but also in a majority of Switzerland's 26 cantons. Despite the substantial likelihood of failure, the proposal already has some wealthy people on the move, say Swiss tax advisors and wealth managers. They caution that even a defeat -- if it's by a relatively modest margin -- could leave mega-wealthy individuals hesitant about the country.
As Frédéric Rochat, managing partner of Geneva-based Lombard Odier, told the Times, “It needs to be voted down with such an overwhelming majority [that this possibility can] be put to bed for 20 years."