Why isn't Switzerland progressively closing its wealth gap? The question is important in the context of the intense ongoing debate from Washington to London about a wealth tax.
The coronavirus pandemic has caused government debt to soar and led to calls for substantial new levies on the rich. The argument goes that the wealthy should pay their fair share and growing inequality must be addressed.
Switzerland is supposed to offer a template. Not only does it have the highest density of millionaires in the world, it has a recurring annual wealth tax, which goes back 181 years. It consistently generates more income than the other three European countries that also have a wealth tax or some version of it. In 2017, the Swiss wealth tax contributed 3.6 per cent to the total tax takings. That’s respectable, compared to the 1.1 per cent generated by Norway’s wealth tax, the 0.55 per cent raised by Spain’s and the even lower sum brought in by Belgium’s limited wealth tax on security holdings.
Eastern Swiss Alps are seen in the background as people cross the Limmat River on the Muensterbruecke bridge in Zurich. Switzerland imposes a wealth tax on its richest few. Reuters
And yet, the Swiss Trade Union Federation, Switzerland's largest trades union, is scathing about the country’s widening wealth gap. Its 2016 report said the wealthiest 2.1 per cent of Swiss taxpayers hold assets equal in value to the remaining 97.9 per cent. Ueli Mader, a Swiss sociologist who specialises in social and wealth inequality, recently noted that “10 per cent of Swiss heirs own three-quarters of the country’s total inherited assets”.
So is a wealth tax even worth it? After all, it exacts an administrative cost, there is a political price to pay for its imposition and it could distort behaviour in terms of rich people holding more of their wealth overseas or simply bailing out of a country. In fact, France suffered an exodus of millionaires between 2000 and 2016 and an annual fiscal shortfall of billions of euros, according to some estimates, because of its "impot sur la fortune". That wealth tax was abolished in 2017 by President Emmanuel Macron.
Even so, in the US, the world’s richest but also increasingly unequal country, the issue is rising to the top of the political agenda. Just days ago, Senator Elizabeth Warren proposed the Ultra-Millionaire Tax Act. It may be hard to pass into law but there is a chance some elements may be included in another budget bill later in the year for President Joe Biden’s planned infrastructure package. On the presidential campaign trail, Mr Biden championed a different way to Ms Warren to raise money from America’s richest. This included taxing unrealised gains on assets after death and doubling the income tax rate to 40 per cent on capital gains for taxpayers with incomes of at least $1 million. But the Biden White House has still responded encouragingly to Ms Warren’s bill. Jen Psaki, the White House press secretary, recently said that Mr Biden “strongly believes that the ultra-wealthy and corporations need to finally start paying their fair share”.
US President Joe Biden is said to be open to the idea of a wealth tax. Reuters
US Senator Elizabeth Warren, centre, is pushing for a wealth tax targeting millionaires. EPA
Ms Warren’s proposed legislation would do that in spades. It would exempt the first $50m of wealth for everyone, impose a two per cent annual levy on households and trusts valued at between $50m and $1 billion and slap an extra one per cent surcharge on billionaires. The senator has said the proposed wealth tax would raise at least $3 trillion over a decade, thus helping to pay for badly needed investments in America’s infrastructure, child care and health reforms. What’s more, she claims, it will create a “fairer” economy.
That argument has powerful appeal, especially because only small numbers of people – just 75,000 households – would have to pay more towards a project of national renewal. A wealth tax would also address the perception – and reality – of inter-generational inequality in America.
In 2019, data from the Federal Reserve showed that the top one per cent owned nearly one-third of all US household wealth, compared to nearly one-quarter about 30 years ago. In that timespan, the bottom 50 per cent went from owning 3.7 per cent of the wealth to just 1.9 per cent. According to the two economists who have done significant work on the issue – Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley – the top 0.1 per cent of American taxpayers accounted for about 20 per cent of wealth in 2012, up from seven per cent in 1978.
In 2019, data from the Federal Reserve showed that the top one per cent owned nearly one-third of all US household wealth, compared to nearly one-quarter about 30 years ago. Reuters
Many economists question the wisdom of taxing wealth every year it is kept, rather than taxing all sources of wealth once they are received or used
There is broad bipartisan approval among ordinary Americans for taxing the very rich. A January 2020 Reuters/Ipsos poll found nearly two-thirds of respondents – 77 per cent of Democrats and 53 per cent of Republicans – in agreement.
The sentiment is mirrored across the Atlantic. Three-quarters of the people polled by Ipsos Mori in Britain in October supported a wealth tax. Everyone said it was better than a rise in income tax, VAT, council tax or capital gains tax. The survey was conducted right before leading UK tax experts and economists issued a report on the fairness and efficiency of a one per cent levy on millionaire households. The report said a one-off tax on a person's total wealth could raise £260bn ($362bn) over five years if the threshold was set at £1m. It would affect just six per cent of Britain's adult population.
The idea of a one-off tax contrasts with the Swiss model, which has obvious problems. Switzerland’s wealth tax is relatively low, varying by canton between about 0.3 and one per cent a year of taxpayers’ total net worth. Also, foreign residents are only taxed on the portion of their fortune deemed related to their living expenses in the country. This means, as Professor Mader has pointed out, that “the Swiss tax system is very favourable” to multi-millionaires, about half of whom come from abroad. Taken together, these aspects help explain why Switzerland might be becoming less equal despite its annual wealth tax.
Elyas Ismail, founder of the Newham Community Project food bank, organises food packages ahead of their collection by international students in east London. AFP
Finally, there are the doubts raised by some about the very idea of an annual tax on wealth. A November study from the UK’s Institute for Fiscal Studies said “the case for a one-off wealth tax is simple” but it’s harder to explain why “it is better to tax the same wealth every year – penalising those who save”. Many economists question the wisdom of taxing wealth every year it is kept, rather than taxing all sources of wealth once they are received or used. In other words, they advocate tax reform rather than the introduction of a new annual wealth tax.
Overall, it seems that one big levy is the way to go. There is precedent. In the throes of the First World War, British economist AC Pigou called for a one-time wealth tax to allow the very wealthy to share more equitably in the burden of an exceptional disaster. He saw it as analogous to a draft – necessary, painful, but sorely needed.
There is resonance today.
Rashmee Roshan Lall is a columnist for The National
Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
The Birkin bag is made by Hermès.
It is named after actress and singer Jane Birkin
Noone from Hermès will go on record to say how much a new Birkin costs, how long one would have to wait to get one, and how many bags are actually made each year.
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
Goalkeepers: Jack Butland, Jordan Pickford, Nick Pope Defenders: John Stones, Harry Maguire, Phil Jones, Kyle Walker, Kieran Trippier, Gary Cahill, Ashley Young, Danny Rose, Trent Alexander-Arnold Midfielders: Eric Dier, Jordan Henderson, Dele Alli, Jesse Lingard, Raheem Sterling, Ruben Loftus-Cheek, Fabian Delph Forwards: Harry Kane, Jamie Vardy, Marcus Rashford, Danny Welbeck
THE BIO:
Sabri Razouk, 74
Athlete and fitness trainer
Married, father of six
Favourite exercise: Bench press
Must-eat weekly meal: Steak with beans, carrots, broccoli, crust and corn
Power drink: A glass of yoghurt
Role model: Any good man
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
Citizenship-by-investment programmes
United Kingdom
The UK offers three programmes for residency. The UK Overseas Business Representative Visa lets you open an overseas branch office of your existing company in the country at no extra investment. For the UK Tier 1 Innovator Visa, you are required to invest £50,000 (Dh238,000) into a business. You can also get a UK Tier 1 Investor Visa if you invest £2 million, £5m or £10m (the higher the investment, the sooner you obtain your permanent residency).
All UK residency visas get approved in 90 to 120 days and are valid for 3 years. After 3 years, the applicant can apply for extension of another 2 years. Once they have lived in the UK for a minimum of 6 months every year, they are eligible to apply for permanent residency (called Indefinite Leave to Remain). After one year of ILR, the applicant can apply for UK passport.
The Caribbean
Depending on the country, the investment amount starts from $100,000 (Dh367,250) and can go up to $400,000 in real estate. From the date of purchase, it will take between four to five months to receive a passport.
Portugal
The investment amount ranges from €350,000 to €500,000 (Dh1.5m to Dh2.16m) in real estate. From the date of purchase, it will take a maximum of six months to receive a Golden Visa. Applicants can apply for permanent residency after five years and Portuguese citizenship after six years.
“Among European countries with residency programmes, Portugal has been the most popular because it offers the most cost-effective programme to eventually acquire citizenship of the European Union without ever residing in Portugal,” states Veronica Cotdemiey of Citizenship Invest.
Greece
The real estate investment threshold to acquire residency for Greece is €250,000, making it the cheapest real estate residency visa scheme in Europe. You can apply for residency in four months and citizenship after seven years.
Spain
The real estate investment threshold to acquire residency for Spain is €500,000. You can apply for permanent residency after five years and citizenship after 10 years. It is not necessary to live in Spain to retain and renew the residency visa permit.
Cyprus
Cyprus offers the quickest route to citizenship of a European country in only six months. An investment of €2m in real estate is required, making it the highest priced programme in Europe.
Malta
The Malta citizenship by investment programme is lengthy and investors are required to contribute sums as donations to the Maltese government. The applicant must either contribute at least €650,000 to the National Development & Social Fund. Spouses and children are required to contribute €25,000; unmarried children between 18 and 25 and dependent parents must contribute €50,000 each.
The second step is to make an investment in property of at least €350,000 or enter a property rental contract for at least €16,000 per annum for five years. The third step is to invest at least €150,000 in bonds or shares approved by the Maltese government to be kept for at least five years.
Candidates must commit to a minimum physical presence in Malta before citizenship is granted. While you get residency in two months, you can apply for citizenship after a year.
Egypt
A one-year residency permit can be bought if you purchase property in Egypt worth $100,000. A three-year residency is available for those who invest $200,000 in property, and five years for those who purchase property worth $400,000.
Source: Citizenship Invest and Aqua Properties
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
MATCH INFO
Day 2 at the Gabba
Australia 312-1
Warner 151 not out, Burns 97, Labuschagne 55 not out
Pakistan 240
Shafiq 76, Starc 4-52
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), EsekaiaDranibota (Harlequins), Matt Mills (Exiles), JaenBotes (Exiles), KristianStinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), EmosiVacanau (Harlequins), NikoVolavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), ThinusSteyn (Exiles)
Need to know
The flights: Flydubai flies from Dubai to Kilimanjaro airport via Dar es Salaam from Dh1,619 return including taxes. The trip takes 8 hours.
The trek: Make sure that whatever tour company you select to climb Kilimanjaro, that it is a reputable one. The way to climb successfully would be with experienced guides and porters, from a company committed to quality, safety and an ethical approach to the mountain and its staff. Sonia Nazareth booked a VIP package through Safari Africa. The tour works out to $4,775 (Dh17,538) per person, based on a 4-person booking scheme, for 9 nights on the mountain (including one night before and after the trek at Arusha). The price includes all meals, a head guide, an assistant guide for every 2 trekkers, porters to carry the luggage, a cook and kitchen staff, a dining and mess tent, a sleeping tent set up for 2 persons, a chemical toilet and park entrance fees. The tiny ration of heated water provided for our bath in our makeshift private bathroom stall was the greatest luxury. A standard package, also based on a 4-person booking, works out to $3,050 (Dh11,202) per person.
When to go: You can climb Kili at any time of year, but the best months to ascend are January-February and September-October. Also good are July and August, if you’re tolerant of the colder weather that winter brings.
Do not underestimate the importance of kit. Even if you’re travelling at a relatively pleasant time, be geared up for the cold and the rain.
Warlight,
Michael Ondaatje, Knopf
Fixtures
Opening day Premier League fixtures for August 9-11
