NCPA - National Center for Policy Analysis


September 17, 2009

As governments around the globe struggle to contain high deficits, companies and executives are bracing for higher taxes.  And increasingly they are turning to Switzerland for relief, according to BusinessWeek.

Swiss cantons (administrative districts) are openly and legally urging multinationals to relocate.  This fall, U.S. fast-food giant McDonald's will move its European headquarters to Geneva from London, joining Kraft Foods, Yahoo! and Nissan, all in an effort to take advantage of Switzerland's lower corporate taxes.  Other incentives include a highly skilled workforce, leading universities, and strong intellectual property laws.

  • In contrast with Britain, Ireland and the United States where tax increases are inevitable, Switzerland has no plans to raise taxes.
  • The 26 Swiss cantons are free to set their on rates, so Swiss-based companies' effective average tax rates range from 10.8 percent to 24 percent of net income.
  • Ten cantons even cut rates more in 2008 to lure investors.

The Swiss enjoy other tax advantages, says BusinessWeek:

  • Unlike Bermuda and the Cayman Islands, Switzerland has a network of tax treaties; under those treaties, Switzerland credits corporate taxes paid elsewhere against the taxes owed to the Swiss.
  • Washington may now tighten restrictions on companies headquartered in jurisdictions that do not have full tax treaties with the United States; as a result, there's a trend away from traditional offshore [havens] to countries with tax treaties with the United States, says Daniel Küng, CEO of Swiss business development agency OSEC in Zurich.
  • Since last year five U.S. companies, including Tyco International (TYC), have moved headquarters from Bermuda and the Caymans to Switzerland for tax reasons.

While the Swiss court companies, the British unwittingly help the Swiss out, says BusinessWeek:

  • As of last year, foreigners living in the United Kingdom for seven years or more must pay tax on income and capital gains earned outside Britain or fork over an annual $49,000 on top of what they ordinarily owe the government.
  • And starting next April, the top income tax rate will jump to 51.5 percent, including social security payments.
  • That's up from 40 percent for anyone, citizen or foreign resident, earning more than $245,000.

Source: Kerry Capell, "Lower Your Taxes: Come to Switzerland," Business Week, September 21, 2009.

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