The super-rich threaten to move away The possible consequences of the Juso inheritance tax

The Juso is targeting rich heirs with its initiative. The super-rich are therefore threatening to emigrate. But what financial consequences would an inheritance tax have? A study outlines four scenarios.

"The Juso are forcing me to emigrate," said well-known entrepreneur and Stadler Rail CEO Peter Spuhler in a recent interview. "Gigantic damage" would be caused by the Young Socialists in the country.

This refers to the Young Socialists' inheritance initiative. This initiative demands that inheritances of CHF 50 million or more be taxed at 50 percent in future. In addition to Spuhler, other prominent entrepreneurs have already announced that they will leave Switzerland if the initiative is adopted.

But what concrete financial consequences would the initiative actually have? Economists at UBS have conducted a study to assess what the adoption of the initiative could mean. They outline four scenarios.

In the most desirable scenario of the Juso, Spuhler and Co. do not make good on their threat and remain in Switzerland despite the new inheritance tax.

The UBS Global Wealth Report 2023 estimates that around 3,400 people in Switzerland have assets of over CHF 50 million. The cumulative total wealth amounts to around CHF 550 billion. The authors of the study assume that around a fifth of those affected will die within the next ten years.

If all the super-rich were to remain in the country, the federal government would collect around four billion francs in additional taxes each year. According to the text of the initiative, the money would have to be used to "combat the climate crisis in a socially just manner". Accordingly, the revenue would not result in tax relief for the middle classes.

In the second scenario, the UBS economists expect 50 percent of the super-rich to move away. The federal government's income from inheritance tax would also be reduced by half to CHF 2 billion.

However, half of the best taxpayers would also be gone. The authors calculate that around CHF 1.1 billion would be lost in income and wealth tax revenue per year. The bottom line, however, is a positive net effect for the state coffers.

However, tax gaps are likely to arise at cantonal and communal level, as the income from inheritance tax is earmarked and must be used for the climate. It would not be possible to compensate for the loss of income from income and wealth tax.

According to the study, it is quite likely that some of the people affected by the tax in future will move away. This is to be expected because the very wealthy are more mobile than the average. This effect was observed in Norway, for example, when wealth tax was increased in 2022.

Even in the top segment, the wealthiest pay the largest contribution to tax revenues. The UBS economists therefore also assume a scenario in which the richest of the rich move away more than the rest of the people who would be affected by the inheritance tax.

To this end, they assume that 75 percent of people with assets of over one billion francs emigrate, while only 25 percent of those with assets of less than 100 million francs move away.

In this case, the revenue from inheritance tax and the losses from wealth and income tax would be roughly equal - the net effect would be zero.

In concrete terms, around CHF 1.5 billion would be available annually to combat the climate crisis. At the same time, the federal government, cantons and municipalities would have to reckon with an annual tax shortfall of CHF 1.5 billion.

There are no winners in the fourth scenario: according to the study, if all people with assets of over CHF 50 million leave Switzerland, the tax authorities will lose around CHF 2.7 billion a year in tax revenue.

And because there are no more wealthy people in the country who would be affected by inheritance tax, no money would flow into the climate pot.

Instead, the remaining taxpayers in Switzerland would be asked to pay: "Instead of asking the richest to pay to combat the climate crisis, in this case all taxpayers in Switzerland might have to pay higher taxes instead, as an indirect consequence of the new inheritance tax," write the UBS economists.

However, it will be a long time before Swiss voters decide on the Juso proposal at the ballot box. The initiative has not even been discussed in parliament yet.

More videos from the department