Swiss cantons are readying for the expected arrival of wealthy foreigners fleeing a punishing new tax regime in Britain that came into force on Sunday.This content was published on April 8, 2008 - 09:16
Relocation companies have been kept busy with enquiries from financial workers in London since the changes were announced last year. So far, only a few have made the move, but more are expected.
Foreigners, known as non-domiciles or non-doms, living in Britain have enjoyed tax breaks for years by keeping some of their wealth in their own countries.
But from this financial year they will be charged a flat rate of £30,000 (SFr60,000). In addition, a number of loopholes, such as capital gains tax, have been closed.
One British management consultancy predicted that dozens of hedge fund managers, for example, would relocate to Switzerland as a result.
Geneva-based relocation company Micheloud & Co told swissinfo that many London non-doms now want to move away to escape the heftier tax bills.
"We had people call us to say that the British tax regime would change and they were looking to get out," said Francois Micheloud.
"We have had a constant stream of people contacting us over the past few months and now we are seeing the vanguard trickling through and setting up in Switzerland. We should send the British Prime Minister, Gordon Brown, a box of chocolates."
More than a whim
Swiss cantons compete with each other to entice wealthy people to live within their boundaries by negotiating tailor-made low tax deals with prospective inhabitants. This practice has angered many neighbouring countries, including France and Germany.
But relocating involves more than simply packing a suitcase and jumping on a plane. Most of those wishing to flee London would have to quit their jobs and find a similar position in Switzerland.
"It is not that easy to move if they have their business activities in London. It takes more than a whim to actually do it," said Micheloud.
"The people who have arrived already are generally investment bankers or traders who have retired or changed their activities after making big bonuses. They are gentlemen of independent means.
"People who are still actively working in London might take a while to come over. But everybody is mobile eventually."
Worsening job sector
Recent turmoil in the financial markets has complicated matters by bringing uncertainty to the job market. Switzerland's biggest bank, UBS, has written off some $40 billion in the past few months, while Credit Suisse has also suffered.
Niels Ellegaard, managing director of recruitment firm SAM Headhunting, told swissinfo that there are signs the job market is slowing in Switzerland.
"The market is still moving, but people are a bit more careful at the moment. They are thinking twice about recruiting, which they were not doing two or three years ago," he said.
"But you cannot put all banking jobs in the same box. Investment banking is suffering but wealth management is still in good health. Some of our clients in Geneva are still recruiting heavily at the moment," he added.
The full impact of British tax changes may not be felt for a couple of years, according to experts. But cantons have stepped up their marketing activities in London in anticipation of a bonanza.
swissinfo, Matthew Allen in Zurich
British finance minister Alistair Darling announced last October that the government would increase taxation for non-domiciled workers. This was in response to public outcry that wealthy foreigners were paying too little tax.
In the March budget, details of a £30,000 flat charge and other measures were outlined. They took effect on April 6.
Switzerland will be competing with other low tax countries, such as Spain, Dubai, Monaco and Singapore for disgruntled non-doms.
The Swiss financial sector announced plans last September to recapture its status as one of the world's top three financial centres by 2015. Part of this plan entails measures designed to entice the best financial workers and hedge funds to Switzerland.
However, the Swiss Private Bankers Association said earlier this year that regulatory and tax reforms were necessary to make Switzerland more appealing for international hedge fund managers.
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