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Swiss shrug off Obama's call for tax crackdown by Dwaynewright


									                                                    Swiss shrug off Obama’s call
                                                    for tax crackdown

                                                    By Malcolm Curtis
                                                    Geneva - 06 May 2009 | 17:20


America’s President Barack Obama wins populist support but raises corporate hackles by
calling for an end to tax havens that allow US multinational companies to escape paying
billions of dollars to Uncle Sam. Representatives in Switzerland, where 120,000 people work
for American subsidiaries with regional headquarters, downplay the likely impact of such
policies on this country, while noting that they face considerable opposition from
Democrats and Republicans - backed by big business.
President Barack Obama's pledge this week to end tax breaks for American multinational ''
companies that ship jobs overseas'' is making headlines but not causing any sleepless nights
for executives for such businesses in Switzerland.

That, at any rate, is the view of Martin Naville, CEO of the Swiss-American Chamber of
Commerce, who told Swisster the president's remarks are unlikely to affect the operations of
US firms in this country.

'' My members are not concerned about it,'' Naville said flatly on Wednesday in response to
Obama's announcement to curb corporate tax breaks in a bid to collect an estimated 210
billion dollars from multinational companies over 10 years, starting in 2011.

The president also underlined his intent to crack down on wealthy American individuals who
are evading paying Uncle Sam by using offshore bank accounts.

'' It's not really a story,'' said Naville, who downplayed the likelihood of such measures affecting
the operations of US companies in Switzerland. '' He (Obama) did not say anything he did not
say in the election.''

The president's message responded to growing anger among many American taxpayers but it
appears headed for heavy opposition from both Democrats and Republicans, backed by strong
corporate interests.

John J. Castellani, president of the Business Roundtable, a trade association of major
American businesses, was quick to condemn Obama's proposal.

'' This plan will reduce the ability of US companies to compete in foreign markets, which will not
only reduce jobs, but will also cripple economic growth here in the United States,'' Castellani
said. '' It couldn't come at a worse time.''

Naville shared these views, while noting Obama's plan looks like a tax grab. But he also noted
that the impact of such changes, even if passed, are likely to affect parent American
corporations in the United States more than their subsidiaries in Switzerland and elsewhere
around the world.

Naville said he did not expect any companies to leave this country, although he acknowledged
that in the current climate, companies considering opening Swiss operations are now delaying
making a decision until regulations become clearer.

While Obama talked about repatriating jobs to places like Buffalo, New York rather than
Bangaolore, India, Naville said companies setting up in Switzerland are relying on skilled ''
multilingual and multicultural'' staff to deal with European operations that cannot be readily
found in places like Buffalo.

With the large number of US companies with European headquarters in the Lake Geneva
region, and elsewhere in Switzerland, Obama's comments have nonetheless been met with
concern in some quarters. Companies such as Procter & Gamble, Caterpillar and DuPont are
among more than 30 American companies with European or regional headquarters in Geneva,
employing more than 33,000 employees.

There are a similar number of firms in the canton of Vaud, including the likes of General Mills,
Yahoo, Philip Morris and Starbucks. All told, American companies account for an estimated
120,000 jobs in Switzerland. Representatives of several companies contacted by Swisster
were unwilling to comment about Obama's proposals.

The public relations representative of one of the largest American employers in Geneva
declined to comment publicly but warned privately of the damage a negative article could do to
the firm. Pascal Broulis, finance minister for the canton of Vaud, appeared unfazed by
Obama's plans, however.

'' The World Trade Organization has laws and the United States is no longer at the centre of
the world and able to carry regardless,'' Broulis said. As a senator, Obama co-sponsored a bill
called the Stop Tax Haven Abuse Act that aimed to closing down tax shelters with a
combination of tougher penalties and stronger enforcement.

The bill has not made any progress in the Congress. But echoes of its intent could be found in
Obama's latest plans, which call for the closing of tax loopholes and the hiring of extra
government staff to track down tax dodgers.

The top corporate tax rate for American companies is 35 percent. But the US Treasury
Department said that in 2004, the most recent year for which figures are available, American
multinationals paid just 16 billion dollars in taxes on 700 billion dollars in foreign income - an
effective rate of 2.3 percent.

One of the practices in question is the ability of American companies to defer payment of taxes
on foreign income until it is repatriated to the States. The Swiss-American chamber's Naville
said that merely puts such companies operating in Switzerland in line with those from such
countries as France, Germany or Japan, who unlike American firms are not required to pay
double taxation.

He noted that US companies in Switzerland are required to pay Swiss taxes and that they are
also required to operate it a transparent way.
But the Obama administration plans to raise 86.5 billion dollars by banning US companies from
establishing foreign subsidiaries to avoid taxation. The Government Accountabilty Office said
that 83 of America's biggest 100 firms have subsidiaries in tax havens. Procter & Gamble has
83 such subsidiaries, alone, the office said.

Some financial companies have spun off hundreds more, with Citigroup showing 427 and
Morgan Stanley 273, according to the New York Times. Obama's announcement comes as the
US is continuing a crackdown on wealthy individuals who seek to escape paying Uncle Sam by
opening accounts in Switzerland and other jurisdictions with banking secrecy laws.

The government is pressing ahead with legal action to obtain the account details of more than
50,000 Americans with Swiss accounts at UBS. Switzerland's largest bank already paid the US
government 780 million dollars earlier this year to avoid prosecution after admitting that some
of its employees counselled clients on illegal ways to escape paying taxes by setting up
phoney offshore companies.

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