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Thursday, March 12, 2009

Businesses Flee US to Switzerland to Avoid Obama's High Tax Plan

RPT-FEATURE-Corporate oil booms in low-tax Switzerland 09:04 AM EDT
* Companies seek Swiss domiciles despite tax row
* U.S. political climate may be helping
* Appeal as corporate location may outlast offshore dispute

By Sam Cage
ZUG, Switzerland, March 12 (Reuters) - The tidy towns and mountain vistas of Switzerland are an unlikely setting for an oil boom.

Yet a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.

In a country with scant crude oil production of its own, the virtual energy boom has changed the canton or state of Zug, about 30 minutes' drive from Zurich, beyond all recognition. Its economy was based on farming until it slashed tax rates to attract commerce after World War Two.

It still has a chocolate-box old town with views over a lake to the high Alps, but is now surrounded by gleaming corporate offices -- including commodity trader Glencore and oil refiner Petroplus -- shopping malls and housing developments.

Local authorities say about 13 percent of full-time jobs in Zug canton are in the raw materials sector.

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.

Guido Jud, head of Zug's tax office, said about 1,200 companies had set up shop there in 2008 -- in line with the long-term average, though it is difficult to assess how many of those are foreign companies until they file tax returns.

Swiss cantons are free to set their own tax rates. For example in 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."

The moves come as the Alpine country is under pressure to stop providing a haven to rich individuals who have been illegally dodging taxes: the U.S. political climate could be contributing to the corporate relocations as authorities seek to crack down on tax avoidance and boost their own revenues.

A bill introduced in the U.S. Congress in March targeting "offshore tax dodges" by individuals and companies names Switzerland among tax havens for evaders.

Offshore tax abuses cost the U.S. Treasury an estimated $30-60 billion in lost revenues from corporation tax, plus $40-70 billion from individuals, according to the office of Senator Carl Levin, who is sponsoring the bill.

Switzerland holds around $2 trillion of estimated global undeclared assets, according to the Boston Consulting Group. Revenue generated from this could be squeezed as a U.S. probe of its biggest bank UBS dilutes banking secrecy.

Yet analysts say the Swiss, whose GDP in 2008 was about 530 billion Swiss francs ($460 billion) according to the International Monetary Fund, are less likely to meet opposition to the low-tax regimes that draw foreign companies: these are deemed less harmful tax avoidance, rather than evasion.

"They are still making some money by having lower taxes on companies," said Lee Sheppard, contributing editor to Tax Notes, a tax journal based in Washington DC.

"But they're not ever going to be making the amount that other governments are annoyed about losing."


My Thoughts

This quote says it all:

"Yet a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration".

This is just the beginning of companies fleeing the US or not coming here from overseas in order to avoid the high taxes that Obama and the Democrats want to burden businesses and corporations with to distribute the wealth.

Unfortunately, when you jack up the taxes so high that it isn't profitable to do business in the US, unemployment goes up because the "evil" rich people and corporations aren't here to hire anyone.

This is not a good time (if there is ever one) to run away companies that want to give Americans jobs. Unemployment is rising close to double digits, and we could use all the jobs we can get to turn this economy around.

We are going to keep losing jobs to countries like Switzerland or Ireland who have low taxes if the Democrats keep raising taxes to "spread the wealth around" or pay for the liberal fantasies and dreams. Obama needs to pay attention to history. Hoover raised taxes on businesses, and the depression deepened dramatically.

It's not too late. We need to keep telling those that we hired to take care of our government not to bring down the economy with tax raises not just for corporations or rich but everyone.

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