The Government could lose hundreds of millions of pounds in revenue as the result of a Swiss campaign to lure hedge fund executives away from London with a promise to halve their tax bills.
Multimillionaire managers are being wooed with offers that enable them to keep their funds in offshore havens and reduce their taxable incomes with official backing. The campaign is being waged by local authorities which are responsible for at least two thirds of all Swiss taxation.
The Greater Zurich Area AG, which represents eight cantons and the cities of Zurich and Winterthur, has already marketed the area in London, and individual cantons have similar plans. Marc Rudolf, a business development manager for the Greater Zurich Area, spoke at an event for hedge fund managers in London in September and said “many more events” were slated for this month and next.
Law and accountancy firms are planning such events, Mr Rudolf said, for hedge funds and other wealthy clients.
The argument is that Switzerland combines natural beauty with a stable environment and, in many cases, low taxes. They contrast their “pragmatic approach” with British taxes, which they say have become punitive.
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One hedge fund owner said that he had set up in Geneva — where he manages assets worth billions of pounds — to escape high taxes and bureaucratic meddling in Britain. “Switzerland’s like Britain was 20 years ago,” he said. “The officials know everything you’re up to, but they’re not in here every day telling you what you should be doing.”
Others could follow, including Brevan Howard Asset Management, Europe’s biggest hedge fund, which has invited London staff to consider whether they want to move to Geneva. It has set up an office that could accommodate up to 50 people.
The Times has learnt that the team could include some of Brevan Howard’s highest earners, who are looking at houses and schools in French-speaking Swiss cantons.
“A final decision is likely to be taken by April,” said a manager in Geneva. “They’ll make the move if they can persuade enough of their people to come here and, ultimately, that depends on the wives and children.”
Sarah Clar-Boson, chief executive of Palladio Alternative Research, which specialises in hedge fund analysis, said: “Many funds started to set up marketing units here two years or so ago. Now it’s clear that the units will be a springboard to doing business.” She added: “The loss to Britain could be enormous.”
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A Swiss tax lawyer told The Times that the Treasury could lose hundreds of millions of pounds a year if the likes of Brevan Howard and BlueCrest Capital, which has also said that it may open an office in Switzerland, moved from London.
Boris Johnson, the Mayor of London, has estimated that 9,000 bankers may move overseas because of the Government’s multipronged attack on their pay packets.
The Swiss campaign to attract wealthy UK residents is part of a wider push, with many cantons putting Germans at the top of their list because of that country’s proximity. Knut Hackbarth, business promotion director for Obwalden, in central Switzerland, said: “Our primary task is to increase the name recognition of Obwalden canton. We don’t target people. We wait for them to approach us.”
Martin Thommen, chairman of the Swiss Funds Association, said 235 hedge funds were based in Switzerland but added that the country aimed to attract more. “Our strategy is to locate asset management and sophisticated products here,” he said.
One of Switzerland’s main selling points is the willingness of cantonal tax officials to negotiate up-front agreements.