Bankers and tax attorneys fear a likely shift to the left in Germany’s election on Sunday is scaring millionaires into shifting assets to Switzerland.
The reinstatement of a wealth tax and tightening of inheritance tax could be on the political agenda if the center-left Social Democrats (SPD), hard-left Linke, and ecological Greens win power.
“This is red hot for the super-rich,” said a German tax lawyer with significant Swiss activities. “Entrepreneurship families are really concerned.”
Despite its efforts to shed its reputation as a shelter for billionaires, the move demonstrates that many wealthy people still consider Switzerland as a desirable destination to invest their money in.
Switzerland has the most offshore assets of any country, and inflows accelerated in 2020, benefiting big banks like UBS, Credit Suisse, and Julius Baer. Geopolitical tensions and concerns about the economic consequences of the COVID-19 outbreak made Switzerland’s political stability appealing.
Deposits of German people and firms at Swiss banks increased, by about $5 billion to $37.5 billion in the first quarter of 2021, according to data from the Bank for International Settlements. This does not include shares, bonds, or financial products.
Insiders claim the inflows have continued despite the lack of more recent figures. “In the last three months, I have booked an above-average quantity of fresh money,” said an experienced client adviser at a prominent Swiss bank who primarily deals with Germans.
“Many affluent people, particularly businesses, are concerned about a leftward shift in Germany, regardless of the outcome of the elections,” says Florian Dürselen, head of Europe at asset manager LGT Switzerland.
“I know a number of German entrepreneurs who wish to establish a footing outside Germany if things get too red (leftist) there,” one prominent Swiss banker stated.
INCOME TAX ON ASSETS
According to a survey released on Thursday, the SPD has a four-point lead over departing Chancellor Angela Merkel’s conservatives, with 25% of the vote.
The SPD wants to reinstate a wealth tax and raise inheritance taxes, while the Greens, who are a likely coalition partner, want to tax the wealthy more harshly. Although both propose boosting income taxes on the wealthy, a tax on assets would produce far more money, according to the tax lawyer.
Client demand for assistance has increased, he added, noting that some businesspeople had sought to protect themselves by making new investments through a Swiss firm or moving assets to a Liechtenstein foundation.
Transferring money to a Swiss bank account, on the other hand, is no longer a viable option. Under enormous worldwide pressure, the Swiss have agreed to share such account data with tax authorities in their clients’ home countries.
“Switzerland is known for its financial stability, legal security, and a high degree of financial expertise. It does not, however, provide any protection against tax evasion “According to a State Secretariat for International Financial Matters spokeswoman (SIF).
According to LGT’s Dürselen, he recently spoke with a German entrepreneur who was concerned that Germany will soon impose heavy taxes on foreign assets or transactions, fueling the perception of Switzerland as a safe haven for capital.
“I believe that significant assets will continue to be transferred to Switzerland,” he said.
Hundreds of affluent German businesspeople have enquired about relocating to one of the low-tax communities near Lake Zurich, according to a local politician.
