Tensions are rising in Valais as the Alpine tax haven is on its way out
The reason is because there’s a plan to end lump-sum taxation for wealthy foreigners that will come to a vote nationwide next year.
Lens mayor David Bagnoud says “Each year we register about ten new arrivals, versus five or six departures. So there are more than 200 people who benefit from lump-sum taxation – a majority of whom are European – who live in our town, [and] around 500 for the whole of Crans-Montana”. With 1,274 such residents at the end of 2012, Valais – after Vaud – is the canton that plays this tax card. It is also the canton that has experienced the largest increase in such taxation over the last 15 years – in 1999, there were just 500 “exceptional” taxpayers in Valais.
The effect on the canton and its villages is obvious: each year, wealthy foreigners add some CHF82.2 million ($92.2 million) to the public coffers. That’s 4.35% of total personal tax revenues, says Beda Albrecht, head of the Valais tax office. The town of Lens alone collects CHF5 million. “This amounts to about 70% of our annual investments. So these taxes are essential for a tourist town like ours which has a large park and infrastructure to maintain: mechanical ski lifts, swimming centre, ice skating rinks and so on,” argues Bagnoud.
Nevertheless, this time-tested system is now in danger. Lump-sum taxation is the most contested method of taxation abroad, notably in neighbouring France where tax exiles are often accused of being unpatriotic. In 2012, the Organisation of Economic Co-operation and Development (OECD) called on Switzerland to end lump-sum taxation. But the coup de grâce could come from within Switzerland itself. Next year, the Swiss will vote on an initiative put forward by politically left-leaning groups that calls for the abolition of lump-sum taxation across the entire country. Five German-speaking cantons have already abolished it in recent years: Zurich, Basel City, Basel Country, Schaffhausen and Appenzell Outer Rhodes.
In Lens, the concern is palpable. Many of the wealthy expatriates are already thinking about leaving Switzerland or have taken measures that would allow them to leave quickly should the Swiss vote “yes”, according to Daniel Emery, director of the Crans-Montana-based Fidag Trust.
“These people, especially the most comfortable among them, are very mobile. And the international competition is fierce: Portugal or Britain for example, offer similar, very favourable tax regimes,” says Emery.
Emery worries not only about eventual loss of tax revenues but also about the effect such a scenario would have on the local economy. “Spending by these wealthy expatriates is essential to maintain the station of Crans-Montana, which is already in trouble because of the strong franc,” he says.