To tax or not to tax gains - that is the question

The people will have the last word on the new capital gains tax at the ballot box Keystone Archive

"Nothing in this world can be said to be certain except death and taxes", wrote American statesman Benjamin Franklin.

This content was published on December 2, 2001 - 10:44

Whether a new federal capital gains tax will be a certainty is in the hands of Swiss voters who began voting on the issue on Sunday.

The initiative for a capital gains tax has been put forward by the Swiss Trade Unions' Federation, which wants to eliminate what it sees as a loophole in the present tax system.

The initiative aims to tax capital gains made in particular at the stock exchange. It is not fair, argue the unions, that people can make a profit at the bourse without having it taxed, while every franc in people's salaries undergoes the scrutiny of the tax man.

"No" votes

The Swiss House of Representatives has rejected the initiative by 120 votes to 65 and the Senate turned it down by an even clearer 35 votes to six. The government has advised voters that a capital gains tax does not fit in today's Swiss tax landscape and has recommended rejection.

Although tucked away at the bottom of the voting ballot, the capital gains tax initiative has nonetheless prompted plenty of comment from its supporters and opponents.

"This capital gains tax is an instrument of pursuing the equality of the tax system. Apart from Greece, Switzerland is the only country in the OECD (Organisation for Economic Cooperation and Development) family which doesn't have a capital gains taxation and we think this legal form of tax evasion should be eliminated," Swiss member of parliament Rudolf Strahm from the Social Democrat Party told swissinfo.

"The initiative aims at creating a tax of 20 per cent on capital gains above SFr5,000 ($3035.82) which means that small investors are excluded."


"There are also exclusions and special regulations for family shareholders," Strahm added.

The Social Democrats are the only party in the government that supports the initiative. The Radicals, Christian Democrats and the People's Party are against.

The Swiss business world is also clearly against the capital gains tax initiative.

The director of the Swiss Business Federation, Rudolf Ramsauer, told swissinfo that the issue had to be put into context.

Rapid increase

"During the 1990s, we experienced a very rapid increase of the overall tax burden and it simply doesn't make any sense to add another tax...while most other industrialised countries are actually going the other way," he said.

"We already have a system which taxes capital and fortune - assets in general - at several levels and you cannot simply add other levels of taxes ad infinitum," he said.

"In Switzerland you have quite a sizable tax on financial assets already, the Vermögenssteuer or wealth tax, and this is not the case with those countries that actually have introduced a capital gains tax," Ramsauer added.

Supporters of the initiative argue that a capital gains tax at the federal level would bring in between SFr400,000 and SFr1 million a year, basing their figures on a share value increase of between five and 10 per cent per year.

Opponents argue that in a bad year at the bourse, for example this year, there would be hardly any or no money to be collected and they add that the costs of actually collecting the tax would be high.

Complex systems

All Swiss cantons have abolished a capital gains tax system, judging them complicated and not very productive.

Supporters of the initiative have said the government has underestimated how much could be brought into the federal coffers with such a tax.

Opponents counter with the argument that the tax would lead to an unprecedented double burden and would send the wrong signal to foreign investors and harm Switzerland as a financial centre. It would also hamper the creation and growth of small and medium-sized enterprises, they say.

Debate about taxes has created a number of celebrated quotes around the world. Who can forget the immortal words of President George Bush in August 1988 - "Read my lips, no new taxes"?

In Switzerland, the chairman of the Swiss Bankers Association, Georg Krayer, probably hit the nail on the head earlier this year when he gave a general truism about taxes.

"The fascinating thing about taxes is that new ones are always being invented despite the fact that no one wants to pay the existing ones," he said.

by Robert Brookes

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