Wednesday, May 13, 2009

Swiss tax competition in full swing

Tax competition isn't only a problem between countries; it can be a problem within countries. Switzerland is no exception: its cantons indulge in a race to the bottom with each other as they steadily lower standards and taxes to attract the wealthy away from each other. A new story in Le Temps newspaper, entitled Obwald, Pirate Fiscal, looks at a recent example.

Obwald has just 33,000 inhabitants - fewer even than the Cayman Islands - and it is at the geometric centre of Switzerland, and it has already been under fire for trying to introduce a regressive tax system (that is: the richer you are, the less you pay.) A federal tribunal vetoed that one, but it was replaced by a flat tax, which is still noxious. As Le Temps put it:

"The canton is envisaging creating building zones of high standing, reserved for particularly affluent contributors."

As we have noted, huge numbers of Swiss are uncomfortable with the whole tax haven thing. A former mayor of Zurich, Elmar Ledergerber, describes this as a scandal and the "undermining of our liberal and social state." Moritz Leuenberger, a federal adviser, has likened this to apartheid. Le Temps said:

"Obwald is accused of endangering 'equality of rights' under the constitution by virtue of its zones of selective living."

And so tax competition rumbles on, steadily shifting the tax charge away from the richer sections of the global population and heaping it onto the shoulders of those less fortunate.

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