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Offshore Jurisdiction
SWITZERLAND
'The
Most European Country' - But Sui Generis
Nowhere else is quite like Switzerland.
It likes to call itself 'the most European country', yet it
has stayed outside the most European Union since Charlemagne.
In several of its famous referendums, as ancient as they are
ultra-modern, it has refused EU membership, most recently
in 2001, by a majority of 71%. However, two sets of 'bilateral
agreements' with the EU are gradually bringing Switzerland
within the EU in all but name.
Switzerland doesn't lack confidence.
A member of the OECD, and probably the most secure member
financially, it was happy to defy the majority of members
that voted for a raft of high-faluting 'measures' against
unfair tax competition in December 1999. Then in April 2000
it surprisingly agreed with an OECD declaration aimed at securing
information exchange in the interests of tax harmonisation
- but a deadpan banking supervisor announced immediately afterwards
that Switzerland was in compliance with the OECD's standards
already.
Economy Dependent
On Economic Tourism
The service sector contributes
70% of Switzerland's economy, and much of that means financial
services. 150,000 Swiss jobs are in banking, and they are
not the worst paid ones. Switzerland is said to be the world's
biggest centre of private banking, with more than a third
of all private wealth based there. Swiss banking assets exceed
three trillion Swiss francs. This has come about because of
three main factors:
- Switzerland is neutral - not
just for a day, but permanently - thus, non-neutral figures
with money to put away choose Switzerland because, long-term,
it has proven a safe haven - a testament to financial brand-value,
if there ever was one;
- Switzerland has conducted
ultra-conservative financial policies which have led to
a consistent rise in the value of the Swiss Franc over decades;
- Switzerland has statutory
banking secrecy, which it has defended stoutly against the
massed tax inspectors of the Western world, while installing
adequate defences against money-laundering.
The economy slowed in 2000-2003
in response to international conditions. The slowdown was
due to sluggish international growth, the appreciation of
the Swiss franc against the euro, the rise in the price of
crude oil and the increasing shortage of skilled personnel
on the Swiss labour market. But Switzerland returned to growth
of 1.8% in 2004, 1.9% in 2005 and an estimated 2.9% in 2006.
The inflation rate for 2006 was 1.2% (est).
Switzerland's Lowtax
Specialisations
Switzerland is not an offshore
jurisdiction such as the Cayman Islands, or Jersey. It is
nonetheless a low-tax jurisdiction, having a series of specialised
corporate forms which can be used by international investors
and multinational companies to reduce their tax bills to a
significant extent.
The bad news is that, as a civil
code jurisdiction, Switzerland tends to the bureaucratic,
meaning slow and expensive.
The regular economy in Switzerland
is moderately taxed, but locals have access to the tax-privileged
company forms as much as foreigners, if they comply with the
rules which broadly prevent any local business operations.
As an OECD, 'respectable' country,
Switzerland has double tax treaties with more than 50 other
countries.
The EU v. the Swiss
In the game of global tax harmonisation,
Switzerland is a key player. Will bankers have to tell tax
authorities about their clients? Will tax avoidance become
a crime? Will the world's finance ministers gang up against
the honey-pot countries?
No-one knows the answers; but
it is sure that Switzerland, as probably the richest and most
successful of the havens that attract rich people on the run
from their wives and tax inspectors, or just seeking good
returns, will be the bell-wether of the flock.
Other than as regards tax, Switzerland
is slowly but surely moving towards the EU. The Swiss steadfastly
refused to give in to EU pressure over disclosure of information
on savings interest, thus threatening the EU's Savings Tax
Directive with its plans for information exchange. Switzerland
finally negotiated an acceptable withholding tax regime with
the EU, allowing Finance Ministers to reach a heavily-fudged
compromise Savings Tax Directive package. After last-minute
haggling by Italy and Belgium, the Directive entered into
force in July 2005.
Learn
more in our full Switzerland
Knowledgebase and Switzerland
News sections.
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