For years Lake Geneva has been a popular location for very wealthy foreigners living in Switzerland, and this looks set to remain the case thanks to a decision by the Swiss parliament. Members of the Swiss National Council have just voted down a proposal that would have put an end to the country's foreigner-friendly system of lump-sum taxation.

Wealthy foreigners residing in Switzerland such as Formula One champion Michael Schumacher or Ingvar Kamprad, the founder of the furniture store Ikea, have benefited greatly from this scheme and will probably continue to do so.
But the scheme's Swiss critics have pledged to take the issue beyond the Alpine country's borders and raise the issue at a European level.

"Schumacher is profiting from all of the advantages our wonderful country has to offer, but he pays just a tenth of the tax that a Swiss citizen would do," the Social Democrat member of parliament, Susanne Leutenegger Oberholzer complains.
"That is unfair to his country of birth, Germany," says Oberholzer who has promised to take the matter to other European nations more likely to frown at tax avoidance.

Under the lump-sum scheme foreign residents pay tax not on their real income, but on their expenditure in Switzerland. In practice, a person's annual rent is taken as an approximation of their spending. For example, a foreigner who rents a villa for the equivalent of 130,000 euros a year is calculated to have a taxable income of 650,000 euros - five times the annual rent. Michael Schumacher's estimated taxable income is 1.3 million euros. However, his total wealth is thought to be in the region of 517 million euros.

There are about 4,000 super-rich foreigners availing of this scheme in Switzerland which replaces normal income tax or wealth tax with a levy on their spending. Not everyone can pay tax under the scheme which is limited to people residing in Switzerland for the first time or after an absence of at least 10 years and who do not work.

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