Gstaad and the Swiss Way

UPDATE 12.7.23: It looks like Switzerland is about to make the smart decision to abandon the OECD’s plan for a “minimum corporate tax.” Indrabati Lahiri reports in Euronews:

Back in June this year, Switzerland set an example for other wealthy European countries, by vocally supporting a minimum corporate tax rate, suggested by the Organisation of Economic Cooperation and Development (OECD). The tax rate was expected to be around 15% at the time.

The Swiss overwhelmingly supported the tax rate, with approximately 78.5% of voters in favour, marking the sixth-highest approval rate in two decades for a market-changing issue.

However, Switzerland could now potentially be getting cold feet, with increasing appeals for the tax reform, which was originally supposed to go live on 1 January next year, to be delayed.

Its hesitancy could very well be due to the country already being very comfortable with its “tax haven” reputation.

Some cantons, like Zug, have a corporate tax rate as low as 11%, which naturally attract a number of global corporate giants, such as commodity trading company Glencore. Other major Swiss firms include food and drink company Nestlé with its headquarters in Vevey, whereas watch manufacturer Rolex is based in Geneva and UBS bank is split between Zurich and Basel.

Increasing the minimum corporate tax could prompt these companies and several others to look for homes elsewhere, potentially fundamentally changing the fabric of the Swiss economy, which has stayed strong for decades.

Not only this, if Switzerland loses its tax haven status, it may experience a plunge in both individual and corporate funds from overseas in its offshore bank accounts. This could pose a potential threat to the strength of its financial and banking sector.

UPDATE 6.30.23: Despite lots of international pressure, Switzerland has decided not to allow the export of nearly 100 mothballed Leopard tanks to Ukraine from Italy in order to preserve its neutrality. This will undoubtedly upset supporters of Ukraine in its war against Russia, but for people who value Switzerland for its steadfast neutrality, this is a sign that the Alpine country has not wavered in its stance. Sam Jones reports for the Financial Times:

Switzerland has vetoed a plan to export nearly 100 mothballed Leopard battle tanks to Ukraine, citing neutrality laws for a decision made just as Kyiv’s counteroffensive enters a decisive phase.

Bern’s veto is likely to spark anger among Switzerland’s European allies, who for months have been pressing the government to relax its restrictive interpretation of a long-cherished neutrality policy.

The tanks have never been in service in Switzerland, were never intended for use by the Swiss military and are not based in the country. All 96 are stored in Italy, having been acquired in 2016 from the Italian military in a private transaction by the Swiss arms manufacturer Ruag.

“The Federal Council has concluded that the sale of the 96 tanks is not possible under [Swiss] law as it stands. In particular, such a sale would contravene the War Materiel Act and would result in a shift from Switzerland’s policy of neutrality,” the Federal Council — the seven-person executive arm of the Swiss government — said on Wednesday afternoon.

Originally posted March 28, 2023.

Hi Taki,

You must be feeling better. This is the best essay on Gstaad and the Swiss Way I have ever read.

Warm regards,

Richard C. Young.

Here’s a sample of Taki on Gstaad from Spectator World:

As everyone knows, snobbery is nothing but bad manners passing itself off as good taste. Past American society dames were terrible snobs, until they met their French and British counterparts, who put them in their place. I’m not going to mention any names because most of them are dead, but looking around me up here in the Alps I’ve seen some new horrors, money snobs who promise to make the older type look like nuns.

Mind you, I’m quite snobby myself when it comes to nouveaux-riches with bad manners. As Yogi Berra remarked: “You can observe a lot just by watching.” What I see here in Gstaad is a classless society, where the locals are proud to be called peasants while new arrivals feel confused at the lack of an upside-down social structure. This is good old Helvetia, where a farmer is more appreciated than a banker, and I particularly like it in the summer when the wife cuts the grass while the hubby rides the tractor. The richest local is a friend of mine, and he got started as a ski instructor. He also conquered Everest, but has remained the same — unassuming as hell and as pleasant as he was when he was teaching spoiled brats how to turn around a mogul.

He also got me out of a jam when, thirty years ago, I decided to build the largest chalet in the region and had the architects drill a hole on a mountainside that could fit the village of Gstaad inside it. But I didn’t like the location, fifteen klicks west of Gstaad, which meant thirty kilometers in the morning to lunch at the Eagle, and another thirty at night to go drinking at the GreenGo. After I’d changed my mind, the mess I had created was given a name, Taki’s Hole, and people would actually visit the place and say terrible things about it. Then Marcel Bach came to the rescue. He built an enormous apartment complex and sold every inch of it to eager newcomers to the region, while simultaneously flogging a brand-new chalet in the Oberport, the hill above the Palace Hotel, to yours truly. The Oberport may have been very chic, but some of the people who moved in after me were more cesspool than class. Suddenly “Palataki” was surrounded by structures overlooking my garden, so once again it was time for hasty migration.

The road to the Palace was blocked for a long time when a Canadian named Stroll moved in and ordered something resembling Taki’s Hole. Yet again, Marcel came to the rescue. He sold my place for an enormous sum by splitting it into three apartments and selling it to a man from Monte Carlo whose name could not appear anywhere, especially on a legal document. I took the moolah and ran.

Mind you, this is Switzerland, and real estate speculation is a no-no. One cannot sell and keep the profit unless one’s lived in the place that’s been sold for many years. If this weren’t the case, Gstaad would be buzzing with sharks with even worse manners than those already here. Then Marcel outdid himself by finding the best yet, a chalet-farm on a hill with only Roger Moore’s place below me and a private road to boot. I’ve now been here for six years and it will be my last residence. I refer to the Oberport as the Gaza Strip due to overcrowding, and my hill as Shangri-La.

Read more from Taki here.