How high is high, when it comes to taxing me? If you know that the American people oppose taxes, nearly universally - especially on them. Tax someone else - THEM, and it is fine, but don't tax ME. What if I taxed oil companies 2% on all money invested in foreign exploration of oil fields and 1% on all domestic oil projects (1% of all revenue raised from those sites). What if I taxed BONUSES 50% when those bonuses were $100,000 or more. What if I taxed 'golden parachutes' at 60% - that is the package would be taxed as a whole. How many people would oppose this? Only the super rich right?
Then the oil company raises gas prices, tire companies raise tire prices, grocery stores raise food prices to pay for increase in tire and gas cost, and so on and so on and so on. In the end who is hurt THE MOST?
The poor.
The rich are not any richer, but they are surviving. The poor will not survive.
If you were one of those rich people, what MIGHT you begin to consider doing?
In England if you make GBP 200,000 bonus (from the article):
Just look at the tax on a bonus of £200,000. First, there is the new bonus tax of 50%, which costs the company another £87,500. Then there is employer’s National Insurance of £25,600. Then the employee pays income tax at 40% on the £200,000, which is £80,000, and employee’s NI, another £2,000. So the total tax is a whopping £195,100. This represents a 98% tax burden on the net payment of £200,000 to the employee.
You get £9,000. Great return. Next year, work just as ... well, maybe not. Maybe don't work at all.
Bonus supertax sends the City's super-rich to Switzerland
As taxes are hiked here, City moneymakers are heading for the high life in Switzerland. How will they survive all that clean living?
Eleanor Mills
Sunday Times, of London
January 17, 2010
Money talks, but wealth whispers. And Switzerland is the snowcapped, landlocked Bermuda Triangle of the cashocracy, where those with serious swag go to quietly disappear among their own kind.
As the financial weather worsens in Britain — bankers are being taxed 50% on this year’s bonuses, and from April half of any income over £150,000 will go straight to the Inland Revenue — many of our super-rich are threatening to abandon London. Discreet advisers in Geneva, Zurich and the high-end Swiss ski resorts say that a steady trickle of wealthy Brits have either made the move or are strongly considering a new life in the mountains. In December alone eight British-based hedge funds decided to move there.
“They want to be out of the UK by April,” says David Butler of Kinetic, which provides services for hedge funds. “There’s a lot of momentum to leave. Geneva is the most popular choice. These people are a kind of club: they go where the others are.” He predicts that up to 150 funds will follow.
Really? Would you want to? And what is life like when you get there? I headed off to the land of mountains and money to find out.
James is 39. Like many City high-flyers of his age, he already has a stash of money in the bank. It would be rude to ask exactly how much, but he talks rather pityingly of those with “only five or 10 million”; he was at the sharp end of some pretty big deals in emerging markets at a top investment bank in the early Noughties; he will never have to work again. In an enormous loft in Geneva, we drink Bollinger and discuss why he has decided to settle in Switzerland.
The apartment, like the other uber-pricey Swiss abodes I visit, is decked out in impeccable banker chic: a symphony of tasteful taupe and greige, all smooth chrome and marble, with unbelievably over-the-top appliances and storage hidden within invisible press-touch cupboards. I conclude that the more stuff you own, the more you invest in keeping it invisible.
But back to James. London he finds claustrophobic — too many people he went to school with, who know too much about him. “I just feel freer out of England,” he shrugs. “In Switzerland I can be who I’ve become, not what I was.” His girlfriend — blonde, tall, cashmere jersey, fur gilet and jeans — laughs. She says he is always pretty crabby on British soil. He hates the traffic and the time it takes to get anywhere. That’s where Geneva scores; its airport is just 15 minutes from the centre by taxi. Everyone I meet mentions this. Is the best thing about Switzerland that it is easy to get away?
For James, good transport links are crucial. His natural habitats are New York, Hong Kong and Shanghai. He is intending to spend much more time in Shanghai, because “that is where it is most happening, man. The energy is terrific”. James is loaded enough to talk like a hipster and dress like a scruffy snowboarder; you would have no idea how rich he is if you passed him in the street.
But when he’s not getting his fix of scintillating cities and investing “a little for me and friends”, the mountains are his passion, particularly biking (he has a £1,000 road bike) and ski-touring (where you walk up on skins most of the morning and descend in virgin powder). High in the Alps, where the white peaks glisten in the painfully bright sunshine and the sky is a chocolate-box blue — this, he tells me, eyes shining, is where he feels most alive. What could be better for a master of the universe than pumping adrenaline and lungfuls of pure air — and all only a two-hour train ride from Geneva? Oh yeah, and the tax deal is pretty damn dreamy too.
As a British citizen, “I’d get totally clobbered by the taxman if I came back to London”, he admits. He is not wrong. Mike Warburton, tax director at Grant Thornton accountants, says: “If he returned to the UK, he would be taxed on his worldwide income and gains as a UK resident domiciled individual.” Say James has £40m invested, and is getting a paltry return of 2% a year (£800,000); it would give him a tax bill of around £400,000. He would also be clobbered, says Warburton, “on income and gains arising after his return to the UK from any capital built up while he was overseas, and gains are taxable at 18%. Even if he put the capital into an offshore trust, he would still be caught by tax-avoidance rules in the UK. Not an appealing prospect.”
In Switzerland, by contrast, life is sweet. All that is required is a deal with the local canton to pay a flat yearly forfait (forfeit). Happily for bankers, it is all negotiable: the better connected your tax lawyer is with the local canton official, the better your deal. The Swiss are famously good at keeping financial secrets, so there is no published list of which canton charges what, but the going rate in Geneva, the most expensive one, is about £180,000 a year. It sounds a lot, but it is much less than you would pay in London. The most popular cantons for rich Brits are Geneva, Vaud and the Valais, because they negotiate favourable forfeits and the locals speak French. In the Swiss-German part of Switzerland, Schaffhausen and Zug are very popular.
Another option is to become a resident, which is fairly simple as long as you are rich and from America or the EU, then pay tax at the local rates, which are linked to the value of property and are typically only 20% of income. When you are sitting on as much money as James, the tax deal feels as invigorating as the mountain air.
It needs to, because Switzerland is Dullsville. Even Geneva (population smaller than York’s) feels provincial. The old town is attractive: grand avenues and tall, flat-fronted stone buildings. On the evening I arrive, it is full of people dressed like d’Artagnan, drinking vin chaud and eating marzipan vegetables to celebrate Escalade (the defeat of the Duke of Savoy, who attacked the city in 1602). Even so, it seems quiet. There are hardly any normal shops: most seem to sell only diamonds and furs (presents for the mistress after a visit to the private bank).
A lawyer I met in Geneva told me he drives to France to go to the supermarket. I don’t blame him; Swiss prices certainly favour the super-rich. I took James and his girlfriend out for supper at a studenty restaurant where they serve only steak and chips: £150 for three, excluding service. The other downside is that everyone looks the same: flat boots, jeans, tasteful warm coats. After London, Geneva feels grey and middle-aged. But it is safe — you can carry around wads of 1,000 (£600) Swiss franc notes and not worry.
I always thought that the best part about being really rich would be that you could live the life you always wanted. So, do you dream of Switzerland? Fiona, a friend who grew up in Zurich, says: “There seems to be a giant megaphone in Switzerland which at 9pm shouts ‘Go to bed’. Nothing happens. It’s the most boring place on earth.”
Switzerland is also the nearest democracy to a police state; life is unbelievably regulated. “When you buy a house, you sign up to the règlements of the commune,” explained Matthew Parish, of Hogan & Hartson solicitors, in his swanky offices in Geneva’s old town. “These specify everything from where and when you can hang out your washing to the exact colour of the flowers in the window boxes of the whole village.” Parish liked his village — “less than 20 minutes to the centre of Geneva by car and no traffic” — and felt pretty sanguine about the petty rules. I was aghast.
Another long-term resident was less happy: he had sat for 10 minutes in his car one evening listening to the end of a World Service programme. The next morning he had a note from the commune telling him he had broken the rules and it must not happen again. On another occasion he left his car — legally — in a car park when he went on holiday; on his return he was visited by Interpol and asked why he had not moved it.
There is no bending the rules. If you default on your mortgage, you will be put in jail. No wonder everyone looks the same. The place is set up to be as homogenous as possible. It makes you long for some spark of individuality. But the rich, of course, are different. They’re rich. And they get that way by caring a good deal about money: making it, multiplying it, hanging onto it and giving as little as possible to the taxman. All over Switzerland is a particular advert showing a smug man with a very swanky watch and his son: “You never own a Patek Philippe, you merely look after it for the next generation.” Switzerland is all about hanging on to the dosh for the next generation.
James, not surprisingly, is very enthusiastic about the country. “It’s fantastic. It’s never had a king or queen, so there is no aristocracy. It was originally three cantons, which in 1291 rebelled against the Austrian princes, who were demanding too much tax. They fought for independence and have remained a self-governing federation ever since.”
Switzerland is also enormously stable: 100-year mortgages are common, property is a safe investment, and the average income is $68,000, against $44,000 in the UK. The Swiss are unlikely to bring in the kind of arbitrary tax changes that have made London’s bankers so jumpy.
It may be politically popular to tax the bankers — Labour earned a rare lift in the polls when the bonus levy was announced — but the government estimates that the top 1% of all taxpayers (many of whom work in finance) will pay 24% of all income tax in 2009-10. The top 5% pay 43% of the total. Tempting though it is to tax the rich as a way of blaming bankers for the crisis (which has cost every British family £12,000), most of them are super-mobile and don’t have to be here. Alienating them means losing the fiscal manna they bring in taxes. And with the budget deficit at a record high, we need all the revenues we can get.
Of course there is some special pleading by the bankers in all this. But just because they are squealing doesn’t mean that London as a financial centre is not under threat. A recent poll of Bloomberg subscribers found Britain had dropped behind Singapore into third place as the city most likely to be the best financial hub two years from now; and a survey of executives found that Shanghai could overtake London within 10 years.
The change in the financial weather in London is not just talk. Several big British-based hedge funds have already moved, including Jabre Capital, while Blue Crest and Bevan Howard are moving substantial numbers of staff to Geneva. I went to visit another hedge fund, Amplitude Capital, whose chairman, Karsten Schroeder, 34, last year shifted all his employees from Mayfair to the canton of Zug (corporation tax as low as 12%).
Zug is 35 minutes from Zurich by train and three hours from Geneva, but feels much more foreign. The Swiss-Germans are not friendly and the language is impenetrable. When I alight in Zug it is -9C. Mist hangs over the lake, and the mountains loom intermittently through the gloom. The industrial estate where Schroeder’s offices are is still being built. It would be hard to imagine anywhere less like London. Shivering in my taxi, surrounded by ugly concrete, I feel a real longing for such Mayfair landmarks as Fortnum’s, the Royal Academy and Burlington Arcade.
The German-born Schroeder is obviously made of sterner stuff. Drawn to the City in its heyday five years ago, he couldn’t wait to leave. “London is expensive and dirty,” he says. “Everything was terrible — trains, airports, water, roads. The service was bad in shops and restaurants. It was all ‘We appreciate your concern but we couldn’t care f***ing less.’”
Then he brags: “In Mayfair I had 50 square metres; in Zug I have 500 and I pay the same price.” His office is certainly palatial — a vast glass-and-steel expanse. In the loo is an orchid. In the atrium, a harp. Does he play? “Do I look like the kind of man who plays the harp?” he snaps. Actually, he does: hairless and antiseptic, he looks more harpist than action man (though he pulls on a red Formula One jacket to drive me to the station in his top-of-the-range white Mercedes and can’t stop telling me how “outdoorsy” he is).
So why did he move his hedge fund? The last straw, he says, was when he was travelling back with his skis and a London cab driver refused to take them: “‘Can’t. It’s in my terms and conditions. I don’t have to take them if I don’t want to.’ I just thought, that’s it. I’ve had enough of London.”
There may have been other reasons, too. David Butler, from Kinetic, the firm that helped Schroeder move to Zug, says pending regulations, and taxes rising to 50%, have started an exodus. The only reason Butler has not moved already himself, he says in his posh offices high above the City, is that his Russian wife likes Highgate.
Schroeder has no wife to veto the move. “I didn’t really warm to London,” he says. “We are a systematic [computerised] fund and we have huge servers, so lots of space makes it easier. In London we were always having hassles with landlords.” He employs mathematicians and physicists, of which Zurich University has a rich supply.
Echoing James, who is furious that the foreign bankers he worked with could settle in Britain without paying any tax under our non-domiciled rules, Schroeder says: “It always seemed unfair that foreigners paid so much less tax than the average Brit. I’m not surprised the government is raising the top rates and cracking down on non-doms.” From the end of January non-doms will pay a £30,000 flat rate. And after April the annual tax and National Insurance bill for a Brit earning £500,000 will rise from under £200,000 to more than £235,000.
Why did Schroeder choose Zug? “It wasn’t just a tax thing — Malta, the Bahamas and the Cayman Islands have lower taxes, but they are too remote and difficult from a business perspective. Singapore or Hong Kong could be good, but the air quality is bad and they’re a long way from Europe. Switzerland is the perfect combination of lifestyle and regulatory environment.”
For him Britain’s problems are far more deep-seated than the tax regime or the infrastructure. “Britain is too dependent on the financial sector. France and Germany at least still make things; you don’t. You have a big problem — you should be investing in education and infrastructure and changing the basis of the economy.”
Our immigration policy arouses his particular ire: he says it is so out of control that the country is buckling under the strain. “In Switzerland all immigrants become part of the community, get good jobs.” With minimal crime and a high standard of living (he pays his cleaner 40 Swiss francs an hour — £24 pounds — against £9 in London), it is a better society. “Here you see children of six or seven walking to school alone. It’s more old-fashioned. It’s a calm, peaceful life.”
Schroeder says Zug reminds him of the places where he was brought up in rural Germany. But he admits that not all his British employees like the place: “Some have gone back. If you are 22, you might wonder what on earth you are doing here.”
For most Brits, Switzerland is synonymous with Zermatt, Gstaad, St Moritz. The very names are shorthand for luxury, money and glitz, and it is to these resorts that many City types who have made their pile are moving. They are certainly more appealing than Geneva or Zug. Brothers Charlie and Simon Jackson from Somerset spent much of their childhood in Crans Montana. Crans is less well known than other ski centres, but that is because, as Charlie puts it, “Wealth whispers. Crans has always been more discreet.” The actor Roger Moore, the head of Carrefour supermarkets (the French Tesco) and several British aristos have chalets here.
The Jacksons are chalet whisperers. Swisch, their company, sells extremely upmarket property to seriously rich City types. They run the kind of bespoke service you can only imagine if you are the type who keeps a Porsche Cayenne in your garage just waiting for you and your mink-lined moon boots. Think deerskin cupboards with antler handles, cookers so high-tech they don’t turn on until you put a little butter in the pan, humidors for £5,000. Prices start at a million Swiss francs (£600,000). If you need to ask, you can’t afford it.
“We’ve seen a real change in how people are buying,” says Charlie. “Before, they would buy an apartment to use for skiing and perhaps come out once in the summer. But we now have four British clients, including a hedge-funder, looking to live out here most of the time. They want to become resident in Switzerland — for tax purposes, sure, but also because they’ve had enough of England.”
Crans, like Verbier and Zermatt, where the Jacksons also operate, is in the Valais canton (a good one when it comes to negotiating tax forfeits) and is near the Italian border, where people are more relaxed. Charlie lived last year in Crans, putting his three small children into the local school, “where they learnt mostly skiing and maths” (how Swiss). “Here they don’t have any of those rules about children that make English life so oppressive. I was entrusted with a group of five-year-olds from my child’s class. I took them up the mountain and skied down. It’s much more old-fashioned, and children respect adults more.”
Crans is a good place to relocate because it’s almost as busy in summer as in winter, thanks to its world championship golf course. It is also popular with Italians, so the coffee is excellent, as is the shopping — Chanel, Hermès, Vuitton. Charlie’s younger brother, Simon, a fixture on the Verbier party scene and a real charmer, says: “We often get two or three families who decide to buy here together and holiday together. Otherwise it can get lonely. You won’t be making Swiss friends, especially in a resort.”
The Swiss may allow rich foreigners to settle, but they do not take them to their hearts. “It’s an expat life,” explained Elizabeth Gregory, 26, who left her job as a trader at Morgan Stanley to work for Advanced Currency Markets SA, a Geneva online trading-services company. Her headline salary is lower than in the City, but “I am £1,000 a month better off”. She needs to be. A room in a shared house, “which I was amazingly lucky to get”, costs her 3,000 Swiss francs a month.
“There isn’t a great deal to do here,” she admits with a smile. The only thing open on a Sunday is her gym; she misses London nightlife and her friends, but she is learning French and intends to live in several countries before retiring at 35. (Wow, these bankers make you feel old.) She goes home to London most weekends.
Might her London banking friends follow her out here? “Sure, why not?” she says, sipping white wine. “They’re all pretty pissed off at the tax on bonuses and the new top rate of 50%. People like me, we’re motivated by money. If you take so much away in tax, there’s no incentive.”
Just look at the tax on a bonus of £200,000. First, there is the new bonus tax of 50%, which costs the company another £87,500. Then there is employer’s National Insurance of £25,600. Then the employee pays income tax at 40% on the £200,000, which is £80,000, and employee’s NI, another £2,000. So the total tax is a whopping £195,100. This represents a 98% tax burden on the net payment of £200,000 to the employee.
One old City hand said: “There’s a parallel with when the Eurodollar market was setting up in Paris in the 1970s and the French slapped a tax on it. By contrast, the Bank of England said we won’t do that, come over here, and the French and the Americans all did, which was the start of London’s pre-eminence as a financial centre. I get a strong feeling of desperation in the City now.”
The fear for the British Treasury is that a big international investment bank might relocate. So far, that has not happened. But Bob Diamond of Barclays Capital, one of Britain’s highest-paid bankers, warned last month: “Both financial capital and human capital are extremely mobile.”
Relocating to Switzerland is by no means a golden bullet, however. Geneva is full to bursting. Manpreet Dhami-Magne is regional director for Emigra Europe, which helps companies relocate. We talk in a pretty cafe over hot chocolate. She tells me the international schools are badly oversubscribed and, echoing Gregory, that it is very hard to find accommodation, particularly in Geneva. A banker’s wife moaned that “a perfectly ordinary family house in Geneva costs £9m”.
More worrying were Manpreet’s comments about Swiss society. She is Asian, from Birmingham, and is married to a Frenchman. She found it impossible to get an apartment because of her Asian name until she went to meet the estate agent with her white husband. “The Swiss are quite racist,” she says. “Rich white foreigners fit in fine, but I had an Asian friend who was stopped every time he came into Switzerland from France.”
Getting non-white and non-European technical staff into the country, and finding them somewhere to live, is “a challenge”, she says. Maybe that is why no major bank has yet moved.
En route to the airport on my way home, my taxi driver slammed on his brakes. We just — and I mean just — missed crashing into an old man on a crossing. “Gosh, that was close,” I said, somewhat shaken.
“Yes, that would have cost me 140 Swiss francs if I’d hit him,” the driver replied.
Hello? He’d nearly killed someone. I couldn’t believe money was the first thing he mentioned.
In Switzerland money talks. But that doesn’t mean it has anything to say.
taxes
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