Lump-Sum Tax Deals Under Threat

Allowing some foreign residents to negotiate a lump-sum tax arrangement in Switzerland (based on their spending in Switzerland rather than their worldwide wealth) has undeniably contributed to the attractivity of Verbier as a home for many international business people.

But there’s a real risk that this arrangement could come to an end because, on the 30th of November, the Swiss people will vote on a Popular Initiative called “Stop The Tax Breaks For Multi-millionaires”, aimed at abolishing the practice nationwide. It is supported by several organisations on the left, including trade unions and the Social-Democratic Party.

Underscoring the importance of wealthy domiciled foreigners to Verbier and Bagnes municipality, the local council organised an information evening at the Espace St. Marc hall in Le Châble on the 16th of October. The president of Bagnes, Eloi Rossier, opened proceedings with a reminder that foreigners with lump-sum tax deals bring in 8 million francs per year, 17% of the total tax revenue. According to Rossier, losing them would mean higher taxes, a poorer canton and job losses. Maurice Tornay, member of the Valais regional Government, calculated that foreigners with lump-sum arrangements pay 84 million francs per year to the cantonal exchequer. And at a national level Yannick Buttet, a Christian Democrat member of the Federal Parliament for Valais, cited indifference and jealousy as the two main reasons why a majority of Swiss voters risk voting yes on the 30th of November.

Although it was framed as a disinterested look at the pros and cons (the evening was entitled “Lump-Sum Tax: Opportunity or Risk for our Region?”) none of the instigators of the initiative were invited, and all of the speakers exhorted citizens to vote no. Following the meeting, we contacted Stéphane Rossini and Mathias Reynard, the two Social-Democrat members of the Federal Parliament for Valais, for their reaction to the comments made in Le Châble. Matthias Reynard replied by email, denouncing the current situation as unconstitutional, as it runs contrary to the Swiss principles of fiscal equity. The Social Democrats also reject the view that tax revenue will be lost: when Zurich canton voted to abolish the arrangement at a local level, 50 % of those benefiting from the regime left, but the increased taxes paid by the remainder cancelled out any loss.

So if December sees the end of the lump-sum tax era for foreigners, will they all disappear from Verbier? Prominent Verbier resident Caspar Schübbe is one of them. He told us that, having lived in the resort for over 20 years, he wasn’t likely to uproot, but he estimates that around half of those living here under the current arrangement will leave.

Over the last few years, the canton of Valais has been hit by national votes that have (or are perceived to have) a disproportionate effect on the local economy. The 2012 Weber law (limiting the proportion of holiday homes that can be built in every commune) for example, or the 2013 LAT (Town and Country Planning law, which tightens up zoning laws, therefore reducing the potential value of plots for some mountain landowners in or near tourism hotspots).

Many Valaisans have come to feel that the rest of the country doesn’t understand them: indeed, the Valais was the only canton in the whole of Switzerland to vote against the LAT. An acceptation of the “Tax-Breaks for Multi-millionaires” law is likely to make things worse.

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