Citizens in Geneva will vote on imposing an additional tax levy for the rich when they go to the ballots on Sunday. Some worry that if put into force, the proposal will have many of the Canton's rich residents heading for the hills.
This weekend Genevans will vote on a proposition put forward by left-wing representatives to apply a solidarity contribution during a period of ten years on personal wealth over three million Swiss francs.
The proposal was born out of the pandemic. Its proponents say middle and lower-income groups saw their purchasing power dwindle due to the energy and raw materials crisis, emerging in the COVID aftermath, and require support to compensate for these factors.
Small to Mid Caps
Its opponents, however, fear tax rate increase to as much as 1.5 percent from 1 percent could incite wealthy residents to leave the region in favor of tax-friendlier Cantons or to exit the country altogether. By comparison, in the municipality of Zurich wealth tax is capped at 0.7 percent.
Although Geneva - with its natural surroundings, economy and quality of life - still has lots to attract wealthy residents from abroad and from within Switzerland, its attractiveness is being «sorely tried by the wave of cantonal initiatives in the tax sector,» Edouard Cuendet, managing director of La Place Financière Genève, an organization representing the financial industry in the Canton, told finews.com.
«Geneva is not an island. The proliferation and frequency of these initiatives foster a feeling of uncertainty, » he added.
Long-Lasting Damage
Entrepreneurs of small to mid-size companies registered in the Canton of Geneva could also be part of the exodus, causing long-lasting damage to the local economy, they argue, while warning of the «Norwegian Syndrome.»
Interestingly, a few of Switzerland's tax-friendly Cantons welcomed some wealthy Norwegians, fleeing their home country after its new government lifted taxes for the wealthy to a maximum of 1.1 percent last year.
Moreover, a large proportion of Geneva’s cantonal income is generated by a few large taxpayers (only 4.2 percent of taxpayers pay 48.4 percent of cantonal income tax), resulting in a gap that would have to be filled by those remaining in the Canton, «La Tribune de Genève» (behind paywall, in French) writes, citing statements made at a local tax committee meeting.
Sawing off the Branch
Chair of the Foundation de la Place Financière Genève Denis Pittet, who is also a managing partner at Lombard Odier, writes on the organization's website that not only do Geneva’s 2022 accounts with a record surplus of 727 million francs, show that it doesn’t need the additional tax boost but that if the rich were to leave, the resulting loss in overall tax contributions would harm the Canton’s social model and economy significantly.
They’ll be sorry they sawed off the branch they were sitting on, one could conclude.
