Switzerland and high taxes are not natural associates. Indeed, a land of snow-capped mountains and cuckoo clocks is more commonly thought of as synonymous with wealth conservation than with redistributive policies.
Nevertheless, a group of political activists from the Social Democratic Party’s youth organization Jeunesse Socialists has launched a campaign calling for fundamental changes, forcing the inheritance tax issue to a referendum.
This Sunday, November 30th, Swiss voters will decide whether to impose a 50% inheritance tax on bequests and inheritances exceeding 50 million Swiss francs (53.57 million euros).
This effort has little or no chance of success. According to a recent Tamedia/20 Minuten poll, 75% of Swiss voters are expected to reject taxing the ultra-wealthy, up from 67% in October.
The proposal is expected to be defeated, but some fear the upcoming referendum will damage Switzerland’s reputation as a tax haven.
According to Deloitte, the country’s wealth management industry is the largest and most competitive in the world, with international assets worth $2.2 trillion (€1.9 trillion). But its global dominance is being challenged by rivals such as Singapore and the UK.
“Some wealthy individuals have reportedly postponed their plans to move to Switzerland because of this initiative,” said Isabel Martínez, a senior researcher at the KOF Swiss Economic Institute at ETH Zurich.
Mobilizing for climate action
The tax proposal, titled “For a Socially and Fiscally Just Climate Policy,” proposes that the revenue raised would be used to tackle climate change.
“Switzerland is not doing enough to protect the climate,” the Jeunesse socialist organization said in a statement. “Billions more will be needed each year to meet the federation’s goals… Looking to the future, those primarily responsible for climate change will need to do more to protect it.”
The inheritance tax will become law if more than 50% of Swiss voters vote in favor and a majority of the country’s 26 cantons vote in favor, with 100,000 supporters already reaching the ballot box.
Risks for companies
This outlook is unpopular not only with the ultra-rich, but also with small business owners in Switzerland.
Swissmem, the voice for Switzerland’s mechanical, electrical and metallurgical industry and technology sector, argued that the tax would “effectively lead to the expropriation of many family-run small and medium-sized enterprises.” The group added: “Many of these small businesses have been built over generations by their owning families, provide tens of thousands of jobs and ensure they pay taxes.”
Isabel Martinez noted that similar concerns were raised in 2015 when Swiss voters rejected a more moderate measure that would have imposed a 20% tax on properties worth more than 2 million Swiss francs (2.14 million euros).
“While less than 2% of the population was directly affected, 71% still voted against it. The main concern was that many family businesses and small businesses would be negatively affected, which would ultimately have a negative impact on the Swiss economy and threaten jobs,” she told Euronews. “The same concerns apply to the current proposal.”
She explained that some opponents don’t like that the tax would be imposed by the federal government, undermining states’ tax autonomy.
limited revenue growth
In most countries that impose inheritance taxes, only a small number of people end up paying inheritance tax, but the measure is generally unpopular among voters.
These measures help reduce inequality, but their ability to raise revenue is limited.
In 2023, inheritance, inheritance and gift taxes accounted for an average of just 0.41% of total OECD tax revenues. Among European countries, levies accounted for only 0.40% of total revenue.
As fiscal pressures on governments increase and the climate crisis intensifies, Switzerland must now decide how best to move forward.