THE STATE OF GENEVA'S FINANCES, January 20, 2022
Nathalie Fontanet, Director of Finances, Human Resources and International Geneva at the Geneva State Council, and Ivan Pictet, former Senior Partner of the bank Pictet & Cie and former President of Fondation pour Genève, joined the AIC to present a current picture of Geneva’s finances and the impact the international community has on them.
Mrs. Fontanet began with an overview of the current financial situation in Geneva. She highlighted that although Geneva has the highest taxes of all cantons in Switzerland, 36% of the population doesn’t earn enough income to pay tax. In fact, a family with two children only starts to pay income tax when they earn CHF 80,500 annually, meaning that the tax situation in Geneva is favorable to families. In contrast, 3% of taxpayers pay 81.5% of wealth tax (which represents 13% of total annual taxes).
To the surprise of many, the Covid pandemic has revealed that those who pay the most taxes in the canton (primarily in the finance industry) were virtually not impacted by the pandemic, so tax revenues from businesses (which represents 61% of the total amount) have remained strong.
This story tells one of a fragile tax system that depends on only a few key taxpayers. For example:
Natural persons:
4.2% of taxpayers pay 48% of income tax
3% of taxpayers pay 81.5% of wealth tax
Legal persons:
0.5% of companies pay 71% of tax on profits
1.9% of companies pay 90% of capital tax
She further pointed out that in 2022, some major economic sectors are growing (international trade, watchmaking industry, financial activities, chemicals and health), while other sectors are still very much affected by the consequences ofthe pandemic (hotels, restaurants, activities linked to the airport).
Mrs. Fontanet also spoke of the impact the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) reform on taxation. The BEPS is a two-pillar solution aimed at reforming international tax rules. She said that while Switzerland supports international efforts to create fair competitiveconditions in the area of multinational taxation, it is essential that Switzerland continue to operate a corporate tax system that is accepted internationally. In other words, in order to maintain a fragile tax pyramid in Geneva, we need to retain and keep attracting multinationals to the canton while complying to international regulations.
Mr. Pictet reiterated that Geneva has seen a strong two-year period during the pandemic, and 2022 is looking equally as good according to many predictions. He stressed that current GDP in the canton is CHF 100,000. However, he also highlighted Mrs. Fontanet’s remarks that while the tax rates are steep in Geneva and produce high tax revenues, the system is fragile and over-dependent on multinationals. In fact, they alone represent 25% of the GDP. Add Swiss-based multinationals, and the rate goes to 41%. Surprisingly, he also noted that there are 53,000 civil servants in canton Geneva – a high percentage of total population—which makes voting on changes in the tax system a challenge.
The luncheon’s audience had many questions and concerns following both presentations and the discussion was lively well past the end of the event.