Tuesday, June 23, 2009

Special Living

The plans of a Swiss canton to attract the super-rich by offering them the chance to buy property in exclusive, previously out of bounds locations has sparked a political row and accusations that the country is encouraging apartheid of the rich and poor.

The canton of Obwalden is planning to launch "special living zones" for millionaires in an attempt to boost its tax take by luring the wealthiest residents. Like other cantons in the tax haven, Obwalden finds itself short of revenue because it has been competing with other jurisdictions to see who can offer the lowest rate of tax.

The result has been a drastic shortfall in tax revenues as people set up PO box companies to take advantage of the low rates, while contributing nothing to the local economies because they live elsewhere.

Obwalden's answer is to lift construction bans on land reserved for agricultural use, offering the rich the chance to secure property on protected land, with the promise of spectacular views of lake and alpine landscapes.

Details of Obwalden's plan, published in the Swiss press, suggest selling villas on an exclusive basis to those who pay high taxes or who create work in the area – "a sunny location, with low noise emissions, good amenities … as well as an unrestricted view that cannot be built on".

The homes would be constructed on land not usually accessible to ordinary citizens, leading to accusations that the policy discriminates against less wealthy inhabitants while rewarding the rich.

"These special living zones are nothing less than a form of apartheid," said Moritz Leuenberger, of the Social Democrats, who is Switzerland's environment and transport minister. "Is a racing car driver of so much more use than a nurse?" he asked, referring to the rich personalities such as Michael Schumacher who have moved to Switzerland to take advantage of its favourable tax laws.

Many argue that the drive to draw in the rich is destroying communities as normal earners are forced out by rising prices.

Obwaldeners are likely to get the chance to vote on the special zones policy in a referendum later this year.

Farmers and the Green party have joined the campaign to stop the special zones. But Obwalden's decision makers have hit back at the criticisms, arguing that those who have the money should have a wider choice.

"Swiss Railways offers a first class with more comfort and more space," said Obwalden's finance director, Hans Wallimann. "There's also the second class where I have less space, but I pay half the amount. Is that so unfair?"

Obwalden reduced its taxes by a quarter three years ago, bringing corporate tax down to 6.6% and local income tax down to 1.8% in reaction to pressure from its inhabitants – 90% voted in favour of the move in a referendum.

It also introduced a flat tax rate, meaning that a millionaire chief executive pays the same percentage of tax as a toilet attendant.

While on paper it appears that 400 new companies moved to the area as a result of the changes, most are nothing more than PO box companies. They fail to offer employment to locals or boost consumer spending in the region.

Source - Guardian


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