Tuesday, December 18, 2007

Escape To Tax Haven Switzerland

Why Haven-Seekers Flock to Switzerland
Relatively low tax rates, respect for financial privacy, and attractive, low business tax laws have earned Switzerland its international reputation as a "tax haven."
Corporations are attracted to Switzerland for its low corporation taxes. Also, this country has proven itself to be politically stable, conservatively managed, financially sound and highly accomplished in its financial operations for centuries.
But Switzerland is not necessarily a tax haven for Swiss residents or domestic companies. However, Swiss tax rates are much lower than in the surrounding EU nations, such as France and Germany. Indeed, those two countries, and the illogical, high-tax bureaucrats at the EU headquarters in Brussels, constantly complain that low Swiss corporate taxes are unfair competition. Of course, they would never think of lowering their own taxes in order to compete.
Even though Switzerland taxes foreign investors, you can avoid many Swiss taxes by choosing certain types of investments that escape those taxes. The tax system is strictly "territorial," meaning the government does not tax income that is earned outside Switzerland.
This month a new and authoritative report confirmed Switzerland to be "a tax paradise" for corporations and holding companies registered there. Switzerland rated highly for its favorable, low tax rates and how easy it is to pay taxes there.
The report, "Paying Taxes 2008 - The Global Picture," is a study by the World Bank and the professional financial services firm, PricewaterhouseCoopers (PwC). The report rates the tax systems in 178 countries according to how much businesses are forced to pay in tax.
Switzerland was 24th worldwide in terms of total tax rate - all taxes that businesses pay - and second in Europe, behind only Ireland. (The United State with one of the highest corporate tax rates of 35% ranked 102nd in level of business taxes and 76th in ease of payments). You can read the report by clicking here.
Meanwhile, this tax praise for Switzerland comes at a time when the EU and Switzerland continue to bicker over Switzerland's tax policies. Brussels wants the Swiss authorities to end the practice that gives companies tax breaks on profits generated in the EU. EU authorities claim these tax breaks violate a 1972 free-trade treaty.
Switzerland has repeatedly refused to negotiate with the EU over the issue. The center-right Swiss government rightfully says that corporate taxes are a cantonal issue and are not covered by the trade agreement.
Research earlier this year confirms Switzerland is attracting companies for tax reasons. It found that a record number of firms had set up shop in the country in the first six months of 2007. Canton Obwalden, which drastically slashed corporate tax rates at the beginning of 2006, recorded the fastest growth.

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