Swiss Cantons Ratchet Up Tax Breaks as Europe Fights Deficits

June 2 (Bloomberg) -- Schaffhausen, the northernmost part of Switzerland, used tax breaks to lure Tyco Electronics Ltd. from Bermuda to a new base on the River Rhine as Swiss cantons offer a tonic to European austerity.

The agreement gives the world’s biggest maker of electronic connectors, whose top managers sit in Pennsylvania, a discount on the canton’s 16 percent corporate tax rate for 10 years, said Schaffhausen Executive Vice President of International Affairs Marcus Cajacob. The exact terms are confidential, he said.

“It makes Schaffhausen attractive,” said Priska Roesli, a senior director in Tyco’s finance department, which nestles between mural-clad houses and a 16th century fortress. “It is such a small canton, you have access to the authorities.”

Schaffhausen, the size of the New York City borough of Queens, is one of 26 Swiss cantons offering tax deals to attract hedge funds, biotechnology firms and Internet entrepreneurs, and companies fleeing tax havens such as the Cayman Islands that are encountering international pressure. The practice threatens to undermine efforts by countries seeking to tame budget deficits that ballooned in the wake of the global financial crisis.

“Low corporate taxes will help Switzerland attract business, but it’s also creating tension as European governments seek revenue to plug their fiscal deficits.” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

Switzerland reported a fiscal surplus last year, and cantons from Zurich to Schwyz are lowering taxes.

Tax Rates

“There is still a clear downward trend in taxation,” said Martin Eichler, head of research at BakBasel, an economic consulting firm in Basel, Switzerland. “There is pressure to be attractive to companies and the cantons are saying that if we have to save somewhere, then it won’t be on tax.”

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Music in my ears. Always good to be resident of a country that understands my "tax needs"...

 

Lowering taxes to spur economic development!?! Blasphemy!

Everyone knows that the only way out of this downturn is to tax and spend, tax and spend dammit! We must tax ourselves into prosperity!