The Emergence of the Swiss Tax Haven, 1816–1914

Sébastien Guex

doi:10.1017/s0007680520000914

Abstract

There is general consensus that tax havens have long played a major role in the evolution of the capitalist system on a global scale. There is also no doubt that Switzerland is one of the first, if not the first, tax haven to have emerged, as well as one of the most important in the world. However, knowledge and understanding of the history, particularly the distant past, of tax havens remains lacking, despite the considerable volume of literature devoted to them. Therefore, this article attempts to make two innovative contributions. The first is an attempt to explain the emergence of the Swiss tax haven, by analyzing the processes and factors whose intertwining led to its emergence. It thus improves the general understanding of the genesis of tax havens at an international level. The second contribution is to show that already on the eve of World War I, the Swiss Confederation possessed the necessary characteristics for a tax haven.

Highlights

There is no doubt that Switzerland is one of the first—if not the first; the question will be discussed in the conclusion—tax havens to have emerged, as well as one of the most important in the world
Schulthess suggested that the way forward to counter this was to “warn [the banks], for example through the Swiss Bankers Association, against recklessness.”[52]. As a matter of fact, the trade association would adopt the strategy suggested by the minister, voting on June 22, 1914, to send to almost all bank executives in Switzerland “a circular urging them to exercise the greatest possible restraint in their propaganda” abroad.[53]
The definition that Palan, Murphy, and Chavagneux reached at the end of their analysis seems to me the most satisfactory: “We define tax havens as jurisdictions that deliberately create legislation to ease transactions undertaken by people who are not resident in their domains, with the view to avoiding taxation and/ or regulations, which they facilitate by providing a legally backed veil of secrecy.”[55]

Summary

Sébastien Guex

There is general consensus that tax havens have long played a major role in the evolution of the capitalist system on a global scale. During the second half of the nineteenth century, Switzerland was transformed into an international financial center that, admittedly, could not compete with London, Paris, or Berlin but that had enough clout and autonomy to play its own role.[9] The emergence of Switzerland as a financial center was largely due to the fact that the banks at the heart of the process—the so-called Big Banks (among which Credit Suisse and the forerunners of the present UBS already played a leading role), as well as the private bankers—were successfully working at occupying a specific role in the division of labor created by the competition between European financial centers They endeavored to attract the highest possible amounts of movable assets, that is, assets held in the form of securities (shares, bonds, etc.) by the wealthy classes—the aristocracy as well as the bourgeoisie—who resided outside Switzerland. For these reasons the Big Banks were early on encouraged, if not forced, to find a large part of their resources and activities in the international market and to specialize in the niche business of wealth management

The Development of Sedentary Tourism

Tax Competition between Cantons

Key Tax Measures to Attract Foreign Capital to Switzerland

Findings

Conclusion