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Tags: bilateral agreements, criminality, european community, jobs at multinationals, professional workforce, social disturbances, swiss economy, swiss tax, swiss-based companies, tax advantages, Unemployment

Multinationals Reconsider Switzerland

Posted on 25 January 2010 by Steven

swiss_economy_downAccording to a SwissHoldings survey conducted in 2009 across 80 of the largest multinational groups operating in Switzerland, there is considerable anxiety and uncertainty over the degradation of working conditions and ‘standard of living’ in general.

The erosion of banking secrecy is no the only illness affecting the health of the Swiss economy. Switzerland is also suffering from a variety of other problems, some of which of such a serious nature that many multinationals are re-examining the advantages of remaining in Switzerland.

Criticism is rising concerning the different tax regimes in operation in the different cantons, which compete to attract the multinationals and foreign holding companies.

This loose federated system is under attack by the European Union, of which Switzerland is not even a member; the EU considers it to be unfair competition.

The companies surveyed evinced anxiety over the uncertainty over the political direction Switzerland will take. The Swiss only narrowly voted for bilateral agreements with the European Union permitting the free flow of workers into Switzerland from any EU country, and the integration into the Schengen space. The result has been a stark degradation in the employment market, as well as precipitous rise in criminality and disorder. In all the major Swiss cities, open air drug dealing and violent crime has risen sharply, prisons and police forces are overwhelmed, and at the same time real-estate prices and rents have exploded as Switzerland welcomed 300,000,000 potential buyers onto its market. Previously, Switzerland’s laws forbid the acquisition of property by nonresidents.

Multinationals have often chosen to set up their European headquarters in Switzerland not only for tax advantages but for the standard of living it offered its expatriates — a major selling point in its global recruitment efforts. The decline in living standards, along with overcrowding, housing shortages, regular traffic jams, rising criminality and other social problems previously unknown here, are causing companies to reconsider their presence here.

A change in the tax structure may just be the last straw. Finance Minister Hans Merz (who was responsible for the UBS bailout) has proposed instead of changing the regime of cantonal prerogatives in taxation, to rather appease EU concerns by proposing to abolish or modify the statutes regulating domiciled or holding companies. The cantons would be forced to raise their taxation of these types of companies. The Swiss government has been doing a lot appeasing of foreign governments over the past year. In Switzerland the Federal government (following almost a Chinese-style model) is not elected by the people.

SwissHoldings director Peter Baumgartner laid particular stress on the fact that the large international companies are seeking ’above all a legal and fiscal stability,’ and that this stability is absent in Switzerland.

However the current problems affecting international companies based in Switzerland go beyond potentially shifting tax structures –which well-paid accountants have always been able to navigate– and overlap with the current problems facing almost every other Swiss citizen: and these problems, extensive in nature, will require a major change in direction of Switzerland’s currently mismanaged foreign policy and economy.

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