Why Swiss want a referendum that could scare the super-rich away

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Switzerland, in November, will vote on imposing a hefty federal inheritance tax on its wealthiest. The proposal to impose a 50 per cent levy on inheritance and gifts above $56 million was put forth by the far-left Young Socialists party to fight climate change. It is now causing concern among the super-wealthy and their financial advisors read more
Switzerland currently has no federal inheritance tax. AFP
Switzerland is set to have a referendum that could see it super-rich flee.
The country in November will vote to decide whether or not to impose a hefty federal inheritance tax on its wealthiest.
The proposed tax has caused concern among the super-wealthy and their financial advisors.
But what do we know about this proposed law?
Let's take a closer look:
Swiss inheritance tax laws
First, let's take a brief look at Switzerland laws.
Switzerland has no federal inheritance tax.
Instead, each canton, except Obwalden and Schwyz, have their own amount of inheritance tax.
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Switzerland is divided into 26 cantons with 26 different cantonal tax regimes.
Spouses, partners and children and grandchildren are usually exempt from the inheritance tax. Reuters
This local tax can be anywhere from 0 to 50 per cent.
It depends on, among other things, the amount of gift or inheritance and the relationship with the deceased.
It is payable by the heirs of the deceased.
Spouses, partners and children and grandchildren are usually exempt from the inheritance tax.
The proposed tax would therefore be adding to the already existing cantonal or municipal inheritance and gift taxes.
The proposal
This federal tax was first proposed in 2022.
It was the far-left Young Socialists party (JUSO) that came up with the idea.
The party, which is associated with the left wing Social Democratic Party (SDP), wants to levy a 50 per cent tax on inheritances and gifts above $56 million.
The Young Socialists collected over 100,000 signatures for their proposal.
They say the money raised will go to fighting the effects of climate change.
Under Swiss law, this means it has to be put on the ballot nationwide.
This is because Switzerland has a system of direct democracy.
Hurdles aplenty
However, getting such a law passed won't be easy.
The Swiss government has already come out against this vote – which reduces any chance it will pass.
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The government quoted a study saying that though the law could potentially raise $5 billion, three-fourths of the potential revenue raised could be at risk if the wealthy leave Switzerland.
'The initiative could lead to reduced revenues for the federal government and especially for the cantons and municipalities,' the government said. 'It would also create the wrong incentives for climate protection.'
Already the top 10 per cent of the wealthy in Switzerland contribute over half (53 per cent) of tax revenue.
Indeed, a study from PricewaterhouseCoopers showed that 78 per cent of those who would be affected are already moving abroad or considering doing so. Reuters
The government also worries that such a law could deal a blow to Switzerland's reputation as a home for the high-net-worth individuals (HNIs) and the ultra-wealthy.
Swiss businessman Peter Spuhler has already publicly said he will leave the country if such a tax is implemented.
He called the idea a 'a disaster for Switzerland'.
And Spuhler isn't alone.
Indeed, a study from PricewaterhouseCoopers showed that 78 per cent of those who would be affected are already moving abroad or considering doing so.
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The survey quoted business families as saying that two out of three family businesses would not remain or would only partially remain within the family at time of succession if such a law was passed.
Experts say the referendum is unlikely to pass at the ballot box.
Still, the idea has already unsettled much of the Swiss elite.