Swiss Taxes Anger the Empire of Europe


In the past, several nations have attempted and failed to control with their national means the region that is labeled “Europe.” Regardless of the difficulty of the endeavor, states have been trying repeatedly. This was the case with religion based entities (medieval Papacy and Islam), non-national monarchies (Habsburgs), national monarchies (France), radical republics (revolutionary France), and ideological empires of the national and international type (National Socialism, the USSR). Regardless of their differences they shared the same craving and ultimate failure. The Continent’s history having been pasted together of interlocking wars, after the last “Big One” a remedy was sought. The cases listed above were attempts to forge unity through conquest. After 1945 an effort was made to use voluntary unity as an antidote to further predatory wars. With millions killed the new goal, not war and then unity but unity followed by peace, had an understandable appeal.

Initially the plan worked adequately. That was because the ladder to the goal was constructed from the bottom up by relying on what Europe shared. Therefore the first steps made use of mutual economic interests. Soviet pressure and the American umbrella both shored up the process as it wound its way upward towards a “more perfect” union. Once the USSR exited the scene and US protection became unimportant, the imperial urge reawakened and for some politicians unity attained a new purpose. The re-thinking separated the concepts of “security” and “union.” This created a pull to use the process of drawing together to further national-state interests. With that the European Union appeared to be a horse which striving riders attempted to mount. Exploiting the momentum towards unity, the use of the process for the benefit of an ambitious national state and its leaders became a hard-to-resist temptation. What conquest driven by national means had failed to accomplish seemed to have become possible the soft way through cooperation leading to domination.

This kidnapping of the concept by pushy powers has found a complementary force in “Brussels.” The higher the level of the achieved union, the more extensive its organs became. Consequently the interests of the central bureaucratic institutions entered the picture. The role of Brussels proves that the organs that administer something wish to justify the retention and extension of their power. This they do by inventing more to direct and by augmenting the size of the apparatus through which they act. Through the above two-pronged process Brussels and the forces behind it, by going beyond consensus or trying to create one artificially, are following the path of history’s “unificators.”

Governing requires money. Extensive directing demands a lot of it. We also realize that taxation above what the payer regards as just and necessary provokes avoidance. The phenomenon is the reverse of what welfarism – an established cult in several EU states – produces. The closer welfare gets to what can be earned (after taxes) the more people will endeavor to become beneficiaries instead of contributors. The resulting drain on the economy will result in higher taxes thus becoming the motor of the game of avoidance participation. Some of the states defining the EU are high tax and extensive welfare states. Capital (like talent) being mobile, the natural desire to avoid what some feel are confiscatory taxes, leads to the flight of funds. Border checks are unlikely to stop the process. The upshot is to try to use the EU to plug the vents. Pressure on the remaining low-tax countries to mend their ways is a measure to complete the process.

Inevitably this attempt has led to a confrontation between the EU and Switzerland. In tune with its known tradition of neutrality – meaning not going along with European trends – the tiny country, against the wishes of its Socialists, is not a member of the EU. Here we must correct a common misunderstanding about Switzerland. This is not at all a taxpayer’s paradise and folks are not welcome to show up wearing dark glasses and toting a suitcase of bills for the purpose of opening a numbered account. Just try this and, unless you are able to prove that the dough is rightfully yours, the bank will call the cops. Even so, the conflict with the EU involves money, more precisely Swiss taxes.

The issue is a consequence of Switzerland’s federalism and peculiar way of levying taxes. The rudimentary details reveal a praxis which will interest libertarians. Swiss taxes are assessed in the community and at the canton (US: state) level. The result is three bills. The smaller one, in the writer’s case about 10%, is for the Federal government. The other two are for the canton and the community. Logically, federal taxes are uniform. The levies of the cantons and the communities differ widely as their take covers operating expenses. Well managed entities demand much less money than the badly governed ones. My last community, in an average canton, levied 125% of the canton tax while my current home demands only 85%. This has manifold consequences. One is that cantons run by leftists are expensive. The more so since good taxpayers tend to move to better run places. On the whole, especially recently, the system causes most bodies to compete for good earners and efficient enterprises by cutting taxes. This tendency is strongly resented by the Left whose attraction to voters lies in taking a lot and redistributing it to its clients. A referendum to end the competition by standardizing taxes is in the making.

Like the local Left, the EU – more precisely its high-spending, high-taxing members – are resentful of the generally moderate level of the burden in Switzerland. The “cheap” cantons rate as special irritants. Last year alone 510 firms located to Switzerland. (Besides “taxes” the country has an excellent infrastructure, a central location, a qualified work force and offers a stable, predictable framework.) Accordingly the EU is charging that “unfair tax competition and tax schemes […] have a detrimental effect on Member States’ fiscal revenues.” The adjustment – especially the taxation of businesses – that is being demanded is based on a Free Trade Agreement signed in 1972. Actually, the deal only regulates trade in certain products and has, as the Swiss point out, no bearing on standardizing fiscal policy.

While Berne might have the better argument, it is “Brussels” that, due to the power derived from its size and its stranglehold on the encircled midget, has the better leverage. It justifies its demand for compliance by alleging that all bilateral agreements between it and Switzerland depend on adhering to every component of the package. Asserting arbitrarily that low taxes constitute a violation of an element in the web of contracts implies that the EU might suspend all of its agreements with its disobedient neighbor. Switzerland has already made significant concessions to the EU. One is that that level of bank confidentiality has been reduced. A 33% tax on the interest earned by accounts held by EU citizens – and the transfer of these revenues to the country of the account holder – is another indulgence. In addition one billion CHF (1US$ = 1.30 CHF) is to be handed to the EU in the course of five years. The money will be used to mediate the economic gap separating the “old” EU members from the “new” members.

The pressure exerted by the EU to forge unity through standardization, centralism and “more government,” will not end with reining in the obnoxiously successful Swiss. Competing for capital and know-how by offering, among other things, low taxes, too, is not a consequence of the genetically high economic IQ of the Swiss. A number of ex-Soviet countries pursue comparable strategies. Once this “Reaganism” shows hard-to-overlook signs of success these member states will also feel the whip the Coachmen like to crack. (Here an impertinent question comes to mind: what will the EU do about China where foreign firms are subject to a 15% tax while the native ones pay 33%). This resistance of the commanding “center” to reform has, besides the craving to be in command, an additional cause. As the current riots in France show, the “old” Europe is hard to reform. Instead they attempt to cope with the challenge of the modern world is by preventing those who are politically dependent on them from implementing their own modernization.

A paradise for taxpayers?

Dear Sir,

And something that may neither be forgotten:
Switzerland will also aapply the infamous European Savings Directive. This means that the Swiss authorities will tax the intrest of the savings of the customer (who is an EU-citizen). 75 pct of the revenue of that taxation will go to the state in which that customer. For example: If a German (who lives in Germany) has got 10,000 Euro on a Swiss bank account. After a few years, the German has got - let's say - 10,500 Euro thanks to interest revenues. Than the Swiss taxation administration can hold 50 Euro of that interest revenue ( In Dutch this is called the 'woonstaatheffing', but I don't know how this is called in English). Then 75 pct of this 50 Euro - so 37.50 Euro - will go to the German treasury.

37.50 Euro that this German customer will have to pay to his own country may not seem that much, but however, this is also an indication that the sovereignity of Switzerland is curtailed by the so called EU-Empire. And instead of lowering its tax rates - in order to keep the money in the EU - the EU-forces are 'hunting' new revenues outside its own borders. How is this called? Colonisation? Imperialism?

It must be also said that Switerland isn't the only country that will apply (this part of the) EU- Savings Directive. But also countries such as Monaco, Andorra, Liechtenstein and San Marino will do. They will also slightly lose their sovereignity...