Get free access to the Editor’s Digest
Roula Khalaf, the Editor of the FT, shares her top stories in this weekly newsletter.
Lawyers and financial experts in Switzerland are alerting to the potential exodus of wealthy individuals reminiscent of the UK’s situation, especially in light of an upcoming referendum on a 50% inheritance tax targeted at the ultra-wealthy.
The country is scheduled to vote in November on a proposal for a federal tax on inheritances and gifts exceeding Sfr50 million ($61 million). Unlike the current regional taxes, this proposal would not allow exemptions for spouses or direct descendants.
This referendum follows the UK’s recent move to tax the global assets of non-resident individuals, prompting many wealthy foreigners to consider leaving—a change the UK may now retract. In contrast, places like Dubai and Italy are actively trying to attract affluent individuals.
Georgia Fotiou, a private client lawyer at Staiger Law, noted, “Switzerland’s chance to attract those leaving the UK has been compromised. It hasn’t deterred everyone, but more are choosing places like Italy, Greece, and the UAE instead.”
The tax idea was introduced by the leftist Young Socialists party in 2022 as a means of funding climate initiatives. Under Swiss law, proposals with 100,000 signatures are eligible for public voting.
Frédéric Rochat, managing partner at Lombard Odier in Geneva, commented, “The necessity for a nationwide vote on this proposal creates unnecessary uncertainty.” He believes the mere existence of the proposal is problematic.
Prominent businessman Peter Spuhler, who heads Stadler Rail and ranks among Switzerland’s wealthiest, criticized the proposal as “a disaster for Switzerland,” warning that his heirs could face a tax bill of up to SFr2 billion.
Implementing this tax could further tarnish Switzerland’s image as a stable location, which has already faced challenges such as the fall of Credit Suisse and new financial rules.
Stefan Piller, head of tax and legal advisory at BDO in Zurich, stated, “Switzerland has long been recognized for its favorable gift and inheritance tax environment. Many family businesses we consult would confront significant difficulties if this proposal is enacted.”
If passed, the new tax would position Switzerland above countries like Italy, which has inheritance rates of 4% to 8%, and places like Dubai and Hong Kong, which levy no inheritance or gift tax.
This week, the business advocacy group Economiesuisse warned that this initiative “jeopardizes Switzerland’s standing as a reliable and steady global business hub.”
As the voting date nears, some individuals are already leaving, while others reconsider moving to Switzerland.
Rochat noted that some Swiss families are opting to relocate rather than face the risk, while potential clients from abroad are also deciding against moving to Switzerland due to the “extremely damaging” uncertainty created by the upcoming vote.
A private banker in Zurich reported that a major client has moved to Liechtenstein beforehand, reasoning that even if the proposal fails, the lingering uncertainty around future proposals influenced their decision.
Nonetheless, some banks are witnessing significant inflows of wealth to Switzerland, which has historically been a safe haven during turbulent times.
Christian Kälin, chair of the London-based consultancy Henley & Partners, which specializes in citizenship and residency through investment, expressed, “I don’t agree that this harms Switzerland’s attractiveness.”
The federal council and both houses of parliament have rejected the initiative, and many experts believe the tax has a low chance of passing in the November 30 vote, given the Swiss public’s historical opposition to wealth taxes. For it to be approved, it requires a majority from both the population and the country’s 26 cantons.
However, Rochat warned that if the proposal narrowly passes or fails, it will likely resurface in the future, creating uncertainty in Switzerland. “It’s essential to defeat it decisively so that this matter can be laid to rest for two decades.”
