Switzerland threatens to clamp down on tax exiles

 By Louise Armitstead 

A raft of Swiss cantons are holding public referendums to abolish the tax deals for rich foreigners. On Sunday, Thurgau will vote on whether to scrap the deals. Another five cantons are set to hold similar referendums over the next few months.

La Gauche, Switzerland's left-wing party, has started a petition to abolish tax deals for rich foreigners across the whole country. The centre-left Social Democrats and the Green party have also come out in favour of abolition.

Zurich, the country's business and financial centre, abolished the favourable arrangements for foreigners two years ago. The change prompted an exodus of 46pc of foreign tax exiles.

Unpopular tax hikes in Britain, in particular the 50pc higher rate income tax, have led to a steady stream of hedge fund managers, bankers and business owners moving to Switzerland. At the same time, the Swiss offered increasingly attractive and simple tax packages to individuals and businesses to encourage the moves.

Google, Kraft and IBM have all chosen Zurich as their European headquarters.

Two of London's biggest hedge funds - Brevan Howard, which manages $32.6bn (£20bn) in assets, and Bluecrest, which manages $25bn - moved their headquarters to Switzerland. Nat Rothschild, the billionaire financier, lives in Klosters; Bernie Ecclestone, the F1 tycoon, lives in Gstaad; and Norman Foster, the architect, lives in St Moritz and Geneva.

The tax exiles face paying as much as 10 times more on their worldwide income as well as their property and other assets, according to experts cited in a Sunday newspaper.

The change in mood is already persuading some exiles to return, including Frederic Denjoy, a former trader in Brevan Howard's Geneva office who has set up a new hedge fund in Mayfair.