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Switzerland: Senate Votes For Partial Abolition Of Stamp Duty On Financial Transactions

Ulrika Lomas, Tax-news.com, Brussels

01 December 2000

In October Tax-news.com reported that the Swiss government hoped to scrap stamp duty on certain types of financial transactions in order to maintain the attractiveness of Switzerland as one of the world's major financial centres. The taxation of transactions is a lucrative money-spinner for the Swiss administration, and scrapping duty would result in a loss of some SFr500m (US$290.7m) to the federal coffers, but nonetheless the Swiss government has put the issue at the forefront of parliamentary debate. This week, the Senate approved the partial abolition of stamp duty, which would cost the government around SFr200m (US$120m) in lost revenue.
The Senate unanimously came out in favour of exempting foreign funds being traded on the Swiss stock exchange, as well as Swiss blue chips floated on foreign stock markets. However, it stopped short of granting the same privilege to Swiss institutional investors, including social insurance funds. But there will be another proposal, to be discussed in the the House of Representatives next week, which seeks exemption from stamp duty for Swiss institutional investors. It's this step that would cost the government a massive SFr500m in taxes.

The move is intended to make the Swiss bourse more competitive and maintain jobs. There are clear worries that foreign markets are syphoning off too much business from Switzerland, with volumes of prominent Swiss blue chip shares traded abroad continuing to rise. The Swiss Exchange (SWX) has said around 25 per cent of total volume in these top-tier shares is traded on the London Stock Exchange. Stamp duty amounts to 75 Swiss centimes per 1,000 Swiss francs worth of traded volume, or 0.75%, compared with 0.5% in London. The planned cooperation between the SWX and London-based electronic trading platform Tradepoint Financial Networks, who are setting up the virt-x trading platform sets up pressure for a reduction in the Swiss rate.

Finance Minister Kaspar Villiger said he welcomed this week's decision by the Senate and no doubt the Swiss Bankers Association (SBA) is of the same opinion, but it would undoubtedly want to see duty cut right across the board i.e. to include institutional business. The SBA hopes that institutional investment will ultimately become the second key pillar of the Swiss asset management industry alongside private banking.

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