LOW TAX COUNTRIES
Andorra
Anguilla
Antigua & Barbuda
Aruba
Australia
Bahamas
Barbados
Belize
Bermuda
British Virgin Islands
Cayman Islands
Cook Islands
Costa Rica
Cyprus
Dominica
Dominican Republic
Gibraltar
Hong Kong
Isle of Man
Jersey & Guernsey
Liechtenstein
Luxembourg
Malta
Mauritius
Panama
Singapore
St.kitts & Nevis
Switzerland
Turks & Caicos
Vanuatu
Index of Articles
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SWITZERLAND
About Switzerland
The Swiss Confederation was founded in 1291 as a defensive alliance among three cantons. In succeeding years, other localities joined the original three. The Swiss Confederation secured its independence from the Holy Roman Empire in 1499.
Switzerland's sovereignty and neutrality have long been honored by the major European powers, and the country was not involved in either of the two World Wars. The political and economic integration of Europe over the past half century, as well as Switzerland's role in many UN and international organizations, has strengthened Switzerland's ties with its neighbors. However, the country did not officially become a UN member until 2002. Switzerland remains active in many UN and international organizations, but retains a strong commitment to neutrality.
Switzerland is a prosperous and stable modern market economy, with a nominal per capita GDP that is higher than those of the big western European economies, United States and Japan, though on a PPP basis, it ranks tenth. For much of the 20th century, Switzerland was the wealthiest country in Europe by a considerable margin. However, since the early 1990s it has suffered from slow growth and, in 2005, fell to fourth among European states with populations above one million in terms of nominal Gross Domestic Product per capita behind Ireland, Denmark and Norway and to the tenth position in terms of Gross Domestic Product per capita at purchasing power parity (also behind the European countries Austria and Iceland. Switzerland is a member of the European Free Trade Association.
In recent years, the Swiss have brought their economic practices largely into conformity with those of the European Union, in an effort to enhance their international competitiveness, but this has not produced strong growth. Full EU membership is a long-term objective of the Swiss government, but there is considerable popular sentiment against this. To this end, it has established an Integration Office under the Department of Foreign and Economic Affairs. To minimise the negative consequences of
Switzerland's isolation from the rest of Europe, Bern and Brussels signed seven agreements, called bilateral agreements, to further liberalise trade ties. These agreements were signed in 1999 and took effect in 2001. This first series of bilateral agreements included the free movement of persons.
A second series covering nine areas was signed in 2004 and awaits
ratification. The second series includes the Schengen treaty and the Dublin
Convention. They continue to discuss further areas for cooperation. Preparatory
discussions are being opened on four new areas: opening up the electricity
market, participation in the European GPS system Galileo, cooperating with the
European centre for disease prevention and recognising certificates of origin
for food products. Switzerland voted against membership in the European Economic
Area in December 1992 and has since maintained and developed its relationships
with the European Union and European countries through bilateral agreements.
| Switzerland |
|
| Capital |
Bern
46°57′N 7°27′E |
| Official languages |
German, French, Italian, Romansh |
| Area |
41,285 km² (136th)
15,940 sq mi |
| Population
|
7,252,000 (95th) |
| GDP (PPP)
|
$264.1 billion (39th) |
| per capita
|
$32,300 (10th) |
| Currency |
Swiss franc (CHF) |
| Time zone |
(UTC+1) |
| Dialling code |
+41 |
SWITZERLAND ECONOMY
Nowhere else is quite like Switzerland. It likes to call itself 'the most European country', yet it has stayed outside the most European Union since Charlemagne. In several of its famous referendums, as ancient as they are ultra-modern, it has refused EU membership, most recently in 2001, by a majority of 71%. However, two sets of 'bilateral agreements' with the EU are gradually bringing Switzerland within the EU in all but name.
Switzerland doesn't lack confidence. A member of the OECD, and probably the most secure member financially, it was happy to defy the majority of members that voted for a raft of high-faluting 'measures' against unfair tax competition in December 1999. Then in April 2000 it surprisingly agreed with an OECD declaration aimed at securing information exchange in the interests of tax harmonisation - but a deadpan banking supervisor announced immediately afterwards that Switzerland was in compliance with the OECD's standards already.
The service sector contributes 70% of Switzerland's economy, and much of that means financial services. 150,000 Swiss jobs are in banking. Switzerland is said to be the world's biggest centre of private banking, with more than a third of all private wealth based there.
Swiss banking assets exceed three trillion Swiss francs. This has come about because of three main factors:
- Switzerland is neutral - not just for a day, but permanently - thus, non-neutral figures with money to put away choose Switzerland because, long-term, it has proven a safe haven - a testament to financial brand-value, if there ever was one
- Switzerland has conducted ultra-conservative financial policies which have led to a consistent rise in the value of the Swiss Franc over decades
- Switzerland has statutory banking secrecy, which it has defended stoutly against the massed tax inspectors of the Western world, while installing adequate defences against money-laundering.
Swiss Gross Domestic Product increased by 3.4% in 2000, and by 2.5% in 2001; but growth in 2002 did not exceed 2%, and the economy even shrank slightly in 2003. Growth resumed at 1.8% in 2004. The slowdown was due to slower international growth, the appreciation of the Swiss franc against the euro, the rise in the price of crude oil and the increasing shortage of skilled personnel on the Swiss labour market. The inflation rate for 2000 was 1.8%, falling to 1.4% by mid-2001 and 0.6% by late 2003. Unemployment was at 3.8% in 2003, falling to 3.4% in 2004.
Switzerland is not an offshore jurisdiction such as the Cayman Islands, or Jersey. It is nonetheless a low-tax jurisdiction, having a series of specialised corporate forms which can be used by international investors and multinational companies to reduce their tax bills to a significant extent.
The bad news is that, as a civil code jurisdiction, Switzerland tends to the bureaucratic, meaning slow and expensive.
The regular economy in Switzerland is moderately taxed, but locals have access to the tax-privileged company forms as much as foreigners, if they comply with the rules which broadly prevent any local business operations.
As an OECD, 'respectable' country, Switzerland has double tax treaties with more than 50 other countries.
In the game of global tax harmonisation, Switzerland is a key player. Will bankers have to tell tax authorities about their clients? Will tax avoidance become a crime? Will the world's finance ministers gang up against the honey-pot countries?
No-one knows the answers; but it is sure that Switzerland, as probably the richest and most successful of the havens that attract rich people on the run from their wives and tax inspectors, or just seeking good returns, will be the bell-wether of the flock.
Other than as regards tax, Switzerland is slowly but surely moving towards the EU. But during 2001 and 2002, and despite the events of September 11 in the US, the Swiss steadfastly refused to give in to EU pressure over disclosure of information on savings interest, thus threatening the EU's Savings Tax Directive with its plans for information exchange. In January, 2003, however,
Switzerland finally negotiated an acceptable withholding tax regime with the EU, allowing Finance Ministers to reach a heavily-fudged compromise Savings Tax Directive package. After last-minute haggling by Italy and Belgium, the Directive entered into force in July 2005
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