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Swiss Committee Rejects Flat Tax Initiative

by Ulrika Lomas, Lowtax.net, Brussels
03 March, 2014

The Swiss Committee for Economic Affairs and Taxes of the National Council (CEAT-N) has recommended to the Swiss people and cantons that the popular initiative calling for an end to the flat tax regime currently benefiting wealthy foreigners in the Confederation be rejected.

The parliamentary committee voted against the initiative "end to tax privileges for millionaires" by 17 votes to 7. The Swiss Council of States had previously opposed the proposals on December 15, 2013.

The CEAT-N committee argued that the flat tax regime strengthens the attractiveness of Switzerland as an economic location for wealthy and internationally mobile households. Their residence in the Confederation has many positive effects, including job creation and preservation, the group added. Furthermore, these high income tax-paying individuals often act as patrons in the cultural sphere and sporting arena, thereby boosting tourism, which is of particular importance for outlying regions, it said.

The majority of the committee therefore concluded that these reasons justify non-adherence to the principle of "horizontal tax equity." In addition, the majority noted that recent revisions had significantly toughened conditions for application of the flat tax regime.

In contrast, the minority underlined the greater need to ensure tax equity, warning that any inequality in tax treatment constitutes a violation of the constitution, with negative effects on "tax morality." Experience in the Swiss canton of Zurich, which elected to end the regime, shows that the minor economic benefits are insufficient to justify violation of tax equity, the minority maintained. Concluding, they alluded to the possible risk of abuse of the system.

Launched by the Alternative Left party, the initiative seeks to ban the flat tax regime nationwide. The system is based on the cost of living rather than an individual's wealth or income. The regime has already been abolished in five cantons in Switzerland and tightened in four. It still applies for direct federal tax throughout Switzerland.

Expressing its support for the proposals, the Swiss Socialist Party (SP) said that the system violates the principle of taxing according to economic means. Insisting that the regime is a blatant case of fiscal injustice, according "tax presents" to rich foreigners, the party also pointed out that it creates undesirable tax loopholes, which must be closed. The number of those benefiting from the regime has doubled over the last ten years, the SP said.

The Swiss National Council is due to vote on the popular initiative shortly.


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