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Lump sum taxation


A paradise for the rich


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A people’s initiative wants to get rid of lump sum taxation, a special fiscal regulation for rich foreigners that many consider unfair. Just how many wealthy foreigners would move if the tax rule was abandoned? (RSI/swissinfo.ch)

In the 1960s German entrepreneur and billionaire Helmut Horten moved to Croglio in Ticino. Horten is regarded as one of the first so-called tax exiles to Switzerland.

He was taxed according to a special fiscal regulation designed for wealthy foreign residents without business activities in Switzerland. In this case the taxes aren’t based on an individual’s fortune and income but on what they spent to maintain their lifestyle.

This is a good deal, not only for wealthy residents, but also for the communes and cantons. As a result, the number of rich foreign residents has increased steadily. In Ticino for instance, there were 523 such residents in 2006. Six years later there were 877, out of a total of 5,445 wealthy foreigners living across Switzerland.

Jean Jacques Aumont made his fortune in the finance industry and today lives on Lake Geneva and has applied for Swiss citizenship. Becoming Swiss would mean losing his lump sum taxation privilege. But this is no longer a priority for him.

It is thought that the majority of rich foreigners live in Switzerland for financial reasons and may move elsewhere if the fiscal regulations change. How long lump sum taxation will continue in Switzerland is unclear. Canton Zurich has already abandoned the practice and a people’s initiative aiming to get rid of it on a national level is going to a nationwide vote in November.