Federal Frustration Over Switzerland Intensifies
A Tale of Two Tournaments: The European Championship and Switzerland's Tax Havens
The European Championship (EM) is nearing its end, leaving behind a trail of excitement and camaraderie. Meanwhile, a different story unfolds in Switzerland, a country that has become synonymous with wealth accumulation and tax havens.
The EM was a spectacle, with the author finding it to be the most dramatically beautiful tournament they've ever seen live. The open-air stadium, a novelty if it had existed when the author was a child, added to the charm. The multilingualism during the tournament was dizzying, yet enjoyable, and following multivoiced conversations on the train was both the best and infinitely overwhelming.
However, the host country, Switzerland, was considered incredibly unspectacular. The author, who lived on the French side during the tournament, did not come across a single critical text about Switzerland during the EM. It seems that the country's wealth and political neutrality have earned it a favourable reputation.
Switzerland's wealth, however, is not evenly distributed. The ratio of private wealth to national income has remained exceptionally high and stable over the 20th century, around 500%, contrasting with other European countries. In 2020, this ratio surged to 793%, driven mainly by capital gains, particularly in housing wealth. This trend reflects Switzerland's capital-friendly policies, political neutrality, and stable environment, which make it a preferred global wealth management center and effectively a tax haven.
Globally, tax havens facilitate offshore holding of vast financial assets, estimated between $21 trillion and $32 trillion. This offshore finance disproportionately benefits the ultra-wealthy by shielding wealth from taxation. The Tax Justice Network estimates a global annual loss of about $427 billion in tax revenues due to such illicit arrangements. Although increased international tax reforms, such as the OECD’s Global Minimum Tax, have added scrutiny, tax havens adapt, maintaining their role in protecting and hoarding wealth by the richest individuals and multinational corporations.
Multinational enterprises (MNEs) use tax havens extensively to shift profits, reducing their taxable income in high-tax countries. For example, German MNEs shifted around €19 billion to tax havens in 2022, mostly by large corporations, showing a strong correlation between company size and profit shifting. This behavior leads to significant distortions in national tax revenues and wealth distribution.
According to French economist Gabriel Zucman, about 8–10% of global household financial wealth—over US$7.6 trillion—is held offshore in tax havens. Corporate use of tax havens shields approximately US$250 billion annually from taxes, notably by U.S. corporations. Around 36% of multinational firms’ profits are shifted to tax havens, which, if repatriated, would increase reported domestic profits significantly (20% in high-tax EU countries, 10% in the U.S.). This profit shifting warps national income statistics and contributes to wealth concentration in tax haven jurisdictions rather than in the countries where the economic activity occurs.
In summary, tax havens, including Switzerland, contribute to increasing wealth inequality and resource hoarding by enabling the ultra-wealthy and large corporations to avoid fair taxation and accumulate disproportionate wealth beyond the reach of most national tax systems.
As the EM winds down, the spotlight shifts back to Switzerland, a country that, despite its wealth, remains a mystery to many. The author's Italian roommate from a neighboring village found it incredible, calling his wife via video call to share the experience. Even a stray Algerian migrant showed interest in the European Championship, a testament to the tournament's universal appeal. But the question remains: how does a country with such wealth manage to remain so unspectacular? Perhaps that is a story for another time.
The European Championship, known for its excitement and camaraderie, showcased the author's fascination with the spectacle of sports, particularly football. Conversely, Switzerland, despite being a preferred global wealth management center due to its capital-friendly policies and stable environment, leaves many questioning how a country of such wealth can remain unspectacular in other aspects of lifestyle, like culture or sports.
