Britain is in the full throes of one of the closest ever General Elections, with no political party seemingly likely to score an overall majority on Thursday.This content was published on May 6, 2010 - 08:37
Other countries are taking an interest in the contest, not least Switzerland that could stand to gain or lose depending on the outcome. The taxation and financial policies of each party will come under particular scrutiny.
Britain has emerged as one of the leading opponents of tax havens while new tax policies targeting the wealthy and bank bonuses have fuelled speculation of an exodus of financial talent to Switzerland.
But Ian Roxan, director of the Tax Programme at the London School of Economics, says it is impossible to accurately gauge which of the three main parties would most help or hinder Switzerland if they are voted into power.
“It is hard to see why any party [Labour, Conservative or Liberal Democrats] should provoke rejoicing or tears in Switzerland,” he told swissinfo.ch.
Britain has been one of the most vociferous voices against tax havens and was among a group of powerful nations that forced Switzerland, and other countries, to change its stance on the exchange of tax information.
The Labour government also invoked a tax amnesty, introduced a levy on resident non-domiciles (targeting foreign businessmen living in Britain) and most recently doubled fines imposed on tax evaders.
The Liberal Democrats have used their campaign to claim they would recover ten per cent of the £40 billion (SFr66.5 billion) lost every year through tax evasion and avoidance – without giving details of how this would be done.
The Conservatives have been the quietest party on the issue, but John Christensen – director of Tax Justice Network – is unimpressed by the policies of any contender.
“The expectation is that the Liberal Democrats would be the stronger international negotiators,” he told swissinfo.ch.
“But all the leading parties appear to have given up on corporate transparency and stopping multinational companies from shifting profit centres, such as intellectual property, to countries such as Switzerland and Bermuda.”
Bank and bonus tax
The Swiss government has recently proposed a tax on bank bonuses, but has so far rejected a general levy on banks or a compulsory insurance fund to guard against future crashes.
Britain has already introduced a year-long 50 per cent tax on bonuses over £250,000. The Labour government also favours a general bank tax on profits and wholesale borrowing, but only if other countries agree to do the same thing.
The Conservatives are unconvinced about bonus taxes, but have said they will introduce a £1 billion bank tax regardless of the actions of other countries.
The Liberal Democrats want an end to cash bonuses above £2,500, no bonuses to directors and none to any employee if banks make a loss. The party would also impose a £2 billion one-off levy on bank profits if it came into power.
Taxing the rich
A new 50 per cent tax bracket on income higher than £150,000 may have prompted some big earners to think about a move to Geneva, Zug or Zurich. But a Liberal Democrat proposal to raise capital gains tax might fuel a greater exodus of hedge fund managers as this would greatly reduce the size of their fees.
The Lib Dems would also launch a one-off so-called mansion tax on properties worth more than £2 million. The Conservatives propose a relaxation of inheritance tax, but also a strengthening of the existing levy on non-domiciled residents.
But Roxan is more interested in what the parties are not revealing, as none of the proposals would raise anything like enough money to erase the nation’s debt. He believes that a rise in income tax, value added tax or national insurance, that would affect effect everyone, is inevitable.
But the wealthy have little to choose between the parties, Roxan believes. “There are tough policies already in place and no-one is proposing to get rid of them,” he said. “The question for people on high incomes is: who is the most unfriendly?”
Britain faces the prospect of having no clear single party majority in parliament for the first time since 1974. This could create decision-making paralysis, which could play into the hands of Swiss regional business promotion agencies, such as the Greater Zurich Area.
British project manager Marc Rudolf told swissinfo.ch earlier this year that uncertainty is playing a role in the decisions of some companies to relocate to Switzerland. “The whole issue is not only about taxes, it is also about insecurity - not being able to plan ahead,” he said. “People in the UK are afraid of what might be coming.”
But struggling Swiss exporters are unlikely to benefit from a hung parliament. The British pound recently dipped as a poll suggested no clear winner, and observers believe the same would happen if that becomes reality on Thursday.
Britain is Switzerland’s fifth-largest export market, receiving SFr11.15 billion of Swiss goods and services in 2008.
Matthew Allen in London, swissinfo.ch
British General Election
Voters go to the polls on Thursday to decide on a new British government. Various polls show the Conservatives gaining 35-37% of votes, Labour 29-30% and the Liberal Democrats 24-26%.
This share of voting would give the Conservatives power but with not enough seats in parliament to gain a clear majority. This would be the first hung parliament in Britain since 1974 and there have been precious few signs this time around of deals being struck between parties to push through legislation.
The ruling Labour government, led by Prime Minister Gordon Brown, have been in power since 1997 and presided during the financial crash and subsequent economic recession.
David Cameron is the leading contender to replace Brown as head of the centre-right Conservative Party.
The Liberal Democrats, led by Nick Clegg, have been also-rans for decades, but this year could hold the balance of power as a strongly placed third party in Britain.
In 2008, trade between Switzerland and Britain totalled SFr18.3 billion, with Switzerland holding a SFr3.9 billion trade surplus.
Exports from Switzerland to Britain rose 5.9% to SFr7.98 billion while imports coming the other way fell 10% to SFr7.2 billion.
This made Britain the fifth-largest export destination for Swiss firms. Switzerland was Britain’s twelfth largest export destination worldwide.
The latest figures for the first 10 months of 2009 show a fall in trade between the two countries. Exports to Britain sank 16.7% to SFr7.99 billion while imports to Switzerland fell 20% to SFr4.9 billion.
Britain was the second-largest recipient of Swiss direct investments in 2007 after the United States. Switzerland poured out SFr57 billion in the form of direct investments in 2007.
British firms invested SFr17.1 directly in Switzerland in the same year.
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