Switzerland's Flat Tax Brings Prosperity, Study Shows

by Ulrika Lomas, Tax-News.com, Brussels

14 September 2009

Following the decision taken in the Zurich Canton earlier this year to abolish the super rich foreigners' flat tax privilege, the entire flat tax system has come under threat. A recent study has revealed, however, that this highly unpopular tax system may actually serve to contribute to the country’s long-term prosperity.

According to a recent study conducted by Professor Charles Blankart of the Humboldt University in Berlin, the controversial flat tax system creates in the region of 35,000 jobs, in the areas of domestic employment and trade and industry.

The study was based on a survey carried out on 126 foreigners currently benefiting from the Swiss flat tax system. The individuals were questioned on their intentions, expenditure and expectations.

There are currently 13 cantons that allow around 4,000 super rich foreigners who are resident in Switzerland, but whose income is derived primarily from outside Switzerland, to pay a flat tax based on their use of public services instead of actual income.

The Zurich Canton voted in February to abolish the flat tax system, and last year the canton of St Gallen put forward a proposal to abolish the tax throughout Switzerland.

Supporters of the initiative claim that the total abolition will avoid tax competition between the cantons for the super rich residents, and claim that the Zurich experience has shown that the super rich are not moving away when the tax privilege is removed.

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