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Switzerland's Financial Sector Is The Economy's "Driving Force"

by Ulrika Lomas, Lowtax.net, Brussels
13 December, 2013

A recent study has concluded that the Swiss financial sector is the "driving force" behind the Swiss economy, and serves to yield significant tax revenues for the Confederation, its cantons and communes.

Conducted by economic research and consultancy group BAKBASEL, on behalf of the Swiss Bankers' Association and the Swiss Insurance Association, the study found that a modern economy in Switzerland would simply be unimaginable without a financial sector. Without functioning banks, monetary supply would break down, without insurance companies, accidents would have devastating consequences, and economic activity would be virtually impossible, the group explained.

According to BAKBASEL, Switzerland's financial sector offers customers, whether private, corporate, or institutional, a wide range of products, thereby facilitating successful economic activity. A well functioning financial sector is "an essential prerequisite for a prosperous economy," the body made clear.

Insisting that Switzerland's "diversified" financial sector is vital for businesses, the group noted that the industry serves to create approximately CHF62bn (USD70bn) in gross value added for the Confederation, CHF34bn of which is generated by the banks (including bank-related services, such as the stock market), and CHF28bn flows from the country's insurance services.

Last year, financial market taxes, notably stamp duties and withholding tax, combined with the value-added tax (VAT) imposed on financial services, yielded an estimated CHF17bn, corresponding to 13 percent of all Federal, cantonal, and communal revenues.

Alluding to the fact that the Confederation's banking sector has undergone major restructuring and realignment since the financial crisis, the institute pointed out that banks have already benefited since mid-March 2013 from the general improvement in the economic climate, posting considerable value added growth. In the long-term, banks are expected to reap the fruits of these changes, and their potential growth path (around 2 percent a year) will be more dynamic than that of the overall economy (1.7 percent annually).

Insurance companies are also forecast to expand quicker than the economic average, with the fastest growth expected in the reinsurance industry. The long-term growth potential of the whole financial sector is predicted to be positive at around 2 percent, although still below the growth rates achieved in the 1990s or the pre-crisis "boom phase."

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