Skip to main content

Swiss Irony

While it may not be the place for tax avoiders (evaders) it's still a Mecca for legitimate tax arbitrage. Convinced, with good reason, that they are about to be tagged with windfall profits taxes, green taxes, anti-petrol taxes, and "you are too profitable" taxes, a number of energy companies are moving to Swiss cantons, like Zug, to take advantage of promotions like 5 and 10 year tax holidays, pre-negotiated corporate tax rates and, occasionally, the personal tax rates for executives that remain valid for up to 20 years and a fistful of "C Permits" for your closest relatives and essential colleagues.

Over the past six months companies including offshore drilling contractors Noble Corp and Transocean, energy-focused engineering group Foster Wheeler and oilfield services company Weatherfield International have all announced plans to shift domicile to Switzerland.
"Switzerland has a stable and developed tax regime and a network of tax treaties with most countries where we operate," Transocean Chief Executive Bob Long said in a statement in October, when it announced its move.

"Stable" being the key word here. Regulatory predictability is still, in some countries, an asset. Zug, corporate tax is about 16 percent but can fall as low as 9.5 percent for companies that do most of their business outside Switzerland. That compares with an average global corporate tax rate of 25.9 percent, according to consultancy KPMG.
"One trend that we see is that particularly Bermuda-based companies are now moving to Switzerland," said Martin Frey, a partner at law company Baker & McKenzie. "That may only partly be obviously for tax reasons, but also for security reasons and the fact that the Obama administration may go after them."

I wouldn't be surprised if the executive office building suddenly mutates a copy of the "expatriation is a death event" tax statutes and creates the "corporate expatiation is death event" tax, treating the corporate departure from the United States as a sale of all assets and leveling a tax on the hypothetical gains. Laws extending United States taxation to non-citizens in a similar way have been on the books since 1996. Effectively, the intent is to make sure that the departing ex-pat continued paying "their dues" long after they had left the country with no intention to return.
Is anyone really surprised that as expat tax terms stiffened in 2006 the United States saw an increasing number of citizens turning in their passports? We think that a little extreme, but wouldn't blink twice at moving our little corporate headquarters out of the United States for friendlier lands if someone decided to level a punitive tax on snarky blogs.
Corporate oil booms in low-tax Switzerland [Reuters]