More On Tax Planningfrom The Advisor's Professional Library
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
- Charitable Giving Charitable giving can reduce your clients’ tax liabilities. However, the general and verification rules for the deduction of charitable gifts must be understood in order to take full tax advantage of such gifts.
In the wake of a national petition filed in October in the country known for its close relationships with high-net-worth clients from all over the globe, bankers are worried that the country’s special tax benefit could be eliminated. And that, they say, would eliminate business as well.
Bloomberg reported Friday that the Socialist Party intends to discard the 150-year-old “forfait,” an expenditure-based tax that foreigners negotiate with Swiss cantons to avoid paying income tax. The forfait’s days could be numbered, if the Socialists have any say in the matter; indeed, on Jan. 1, Appenzell Ausserrhoden will become the third canton to reject the system; a year later, Basel will do likewise.
“It’s an outrage that ordinary people should pay more tax than rich movie stars, singers and sporting celebrities,” Romain de Sainte Marie said in the report. De Sainte Marie, president of the Geneva Socialist Party, added, “It’s a form of tax evasion.”
A backlash is growing in the Alpine country over the fact that billionaires, such as Ikea founder Ingvar Kamprad, pay a lower tax rate than native Swiss, even as bankers circle the wagons to protect what they say is a lure to draw wealthy clients who bring jobs and growth to Geneva with their money.
“We need to defend it for our own sakes as this is a very interesting customer base,” Gregoire Bordier, president of the Geneva Private Bankers Association, said in the report. “This system already brings significant revenue to the authorities.”
Geneva’s Socialist Party submitted the required 10,000 signatures in January to cause a vote on the forfait that could come as early as 2014, according to Arnaud Moreillon, secretary-general of the party in Geneva.
The party has gone farther than pressing individual cantons on the tax system; in a coalition with the Alternative Left and two labor unions, it presented a petition on Oct. 19 with more than 103,000 signatures to the Swiss Parliament, calling for the “abolition of scandalous tax privileges for foreigners.” That could result in a parliamentary debate by 2015 and a national referendum within 10 months afterward.
“While the system is a nice little earner for private bankers and luxury property agents, Geneva is regarded as a parasite by tax authorities around the rest of the world,” de Sainte Marie said. “Proportionately, ordinary people are paying more tax than rich forfait holders.”
Zurich became the first canton to abolish the forfait in 2009; 52.9% voted to eliminate the special tax treatment for foreigners. Despite threats to the contrary, not all the wealthy left the canton after the vote. According to Marius Brulhart, professor of economics at Lausanne University, more than half stayed despite their mobility and sensitivity to tax.
“It seems they don’t all run away when you remove their special treatment,” Brulhart said in the report. “The loss in tax receipts from people who moved away was offset by extra tax from those who stayed.”