For a few thousand millionaires in Geneva, a regional vote in the next few days could have a lasting impact on their wallets.
(Bloomberg) — For a few thousand millionaires in Geneva, a regional vote in the next few days could have a lasting impact on their wallets.
The June 18 ballot will ask citizens in the affluent lakeside city-canton whether to slap an extra “solidarity” levy on individuals with more than 3 million francs ($3.3 million) to their name for the next decade.
The vote is a legacy of the pandemic, when widening global inequality and worries on how to pay down swelling public debt spurred widespread policy discussions on how to fix the balance. Wealth taxes were one idea mooted from the UK to California.
While Switzerland already has such a levy, a coalition of leftist lawmakers, unions and activists in Geneva gathered enough signatures under the country’s system of direct democracy to ask if its richest citizens should pay even more.
“Getting out of the health, social, economic and climate crisis requires action of a massive scale,” the initiative’s text reads. “The middle classes are paying a heavy price for this crisis, and it is therefore fair to ask the multimillionaires for an effort of solidarity.”
The second-biggest city of one of Europe’s richest countries, Geneva has 506,000 inhabitants.
Cantonal wealth-tax data show that of those, more than 19,000 reach the threshold of being millionaires. A smaller number, somewhere between 4,200 and 10,000, would be affected by the proposal — roughly the top 1%.
Geneva’s wealth tax of about 1% per annum is already one of Switzerland’s highest, according to thinktank Avenir Suisse. The “temporary solidarity contribution on large fortunes,” as the proposal puts it, would effectively lift it to 1.5%.
According to the campaigners, which include the Swiss Green Party, the measure will bring an additional 430 million francs ($474 million) over its duration of 10 years.
While the alliance that pushed for the levy did so at a time of massive fiscal spending and public-finance-shortfalls, things have since changed. Geneva reported a record budget surplus of 727 million francs in 2022 due to higher-than-expected tax revenue.
That’s why the newly elected cantonal government is advising citizens to vote no.
“This proposal was thought out in times of the Covid crisis, to enable the state to deal with an increase in poverty thanks to more financial means,” Finance Minister Nathalie Fontanet of the pro-business liberals told the Tribune de Geneve newspaper. “Tax revenues in recent years have been sufficient to deal with it.”
Local opponents point to the example of Norway, where an increase of the levy to between 1% and 1.1% — notably lower than that proposed in Geneva — spurred rich people to leave the country.
“We want to absolutely avoid the Norwegian syndrome where the wealthy are moving away,” Vincent Subilia, president of the Geneva Chamber of Commerce and Industry, said in a phone interview. “This idealogical and demagogical initiative should be clearly rejected,” he said. “It’s dangerous because it could jeopardize the residency of Geneva’s wealthy citizens.”
Last year, the city’s richest taxpayers — those with more than 2 million francs in global wealth — paid nearly 700 million francs, or 83% of Geneva’s total wealth tax, according to cantonal data.
“It is a tiny number of individuals,” Subilia said. “If 10 of them were to leave the region, that would deprive us of 200 million Swiss francs in tax revenue.”
But Switzerland’s Green Party is downplaying the danger of an exodus, observing that the existing wealth tax hasn’t driven rich citizens away.
“Opponents will say this device will scare away some of those fortunes,” the party said. “The Greens find that hard to believe.”
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