Switzerland Attracting European Offices of U.S. Companies

September 23, 2009

Apparently Switzerland is the place to be for lower taxes:

This fall, U.S. fast-food giant McDonald's will move its European headquarters to Geneva from London, joining Kraft Foods, Yahoo!, and Nissan. They've all relocated their main Europe offices to Switzerland in the last two years to take advantage of low corporate taxes.

A highly skilled workforce, leading universities, and strong intellectual-property laws also attract companies. Yet those low taxes are very much part of the lure. "There is a lot of interest from companies looking to shift their taxable profit to countries with lower rates," says Andreas Müller, an international corporate tax partner at KPMG in Zurich. Meanwhile, Britain and Ireland are increasing personal income tax rates for top earners. In the U.S., tax hikes seem inevitable. Switzerland has no such plans, says Stéphane Garelli, professor of competitiveness at IMD Business School in Lausanne.

Part of this sounds like actual tax rates (indeed, the U.S. has higher corporate tax rates than virtually every other industrialized nation), but part of this sounds like uncertainty. Merely suggesting that taxes will be going up seems to be enough to get businesses looking elsewhere for job creation and capital formation.

Taxes are of course just one factor that's considered when locating a business somewhere. But it's one of the factors. To have elaborate public services you need to have an economy, and bad tax policy can hurt efforts to bring about long-term economic growth.

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