My college French is sufficiently rusty that I'm not going to try to conjure up the Gallic equivalent of "Eduardo Saverin wants to de-friend the United States of America," but I'm sure newly minted President of the Republic Francois Hollande will come up with something pretty soon. By promising to tax the wealthy in his country at the pillow-over-the-face rate of 75 percent, he tempted those long-time rivals across the Channel to offer refuge to mugging-averse French citizens. And if a haven so close to home proves insufficiently haven-y, tax refugees can always look east — really, really far east, to where Singapore is beating the Swiss at their own game with low taxes and a business-friendly environment.
Taking advantage of an opening he couldn't refuse, Britain's Prime Minister David Cameron remarked, "When France sets a 75 percent top income tax rate we will roll out the red carpet, and we will welcome more French businesses which will pay their taxes in Britain."
Britain isn't necessarily known as a tax haven — just ask the Rolling Stones — but everything is relative, and relative to France … well … the UK looks pretty good. And frankly, it's easy to remain a tax haven despite the European Union's militant stance against such refuges when your neighbors keep lowering the bar.
Well … Unless you're Swiss, I guess, and you've been taking that pro-tax campaign seriously, pissing away, in the process, your big attraction to companies such as multinational commodities trading firms. Reports Reuters:
Industry sources say it is now tough for new firms to negotiate tax rates in Switzerland below the official 10-12 percent rate usually granted to "holding companies", whereas traders in Singapore can get a 5-10 percent rate via the Global Trader Programme. …
Tax breaks may be tougher to come by as Switzerland faces growing pressure from the European Union, which says that some cantonal tax agreements - 'fiscal holidays' which can slash federal taxes in half over five-year periods - amount to unauthorised state aid.
Business people moving operations to Singapore also cite cost of living and lifestyle as attractions in the city state, as well as the fact that the place actually has ports and is conveniently located. Switzerland, on the other hand:
Clyde & Co.'s Knowles said Singapore's position as a shipping hub means "it has warehouses and storage. It is very different from somewhere like Geneva which has no real reason, beyond tax advantages, from being a trading centre."
Countries succumbing to international pressure to hike taxes and collaborate with foreign tax collectors might be overlooking the likelihood that, in a competitive world in which people have to make use of their comparative advantages, one of those advantages might be refraining from sucking people dry.