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  #1381  
Old 16.12.2014, 13:44
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Re: Repercussions of Vote Already Starting...

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I understood banking is about 10% of Swiss GDP, and manufacturing is more than twice its size. Nevertheless, it would all get affected by cancelling the Bilateral. But I don't see anyone in their right minds calling for the cancellation of the Bilateral, just renegotiation of it. It would hurt both sides to outright cancel it.

Now is not a very good time to move on this issue, but not to say it should be completely forgotten. It may take 5 or more years to find the right opportunity with the right leverages.

In regards to MEI, the key contention is Schengen. Should there be any reconsideration of Schengen regulation across Europe, I understand Switzerland can opt out. With Britain and Germany starting to grumble, the work could be done by other countries on Switzerland's behalf.
About "cancellation of the Bilateral, just renegotiation of it" You did see the announcements from the EU saying "no renegotiation", new announcement due today - maybe they will change their minds

About "In regards to MEI, the key contention is Schengen." Also no, MEI is all about fmop; Schengen is not mentioned
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  #1382  
Old 16.12.2014, 14:03
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Re: Repercussions of Vote Already Starting...

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Sorry, but I've been out of loop and have not read all the posted links. Is it your thesis that Switzerland's economy is mainly due to its banking secrecy and taxation? And most of its people are employed by the government, banking and service sectors? People chose to operate from Switzerland because it is considered a safe haven, predictable and reliable. Are you attributing this all to government policies? Do you think ANY country can implement the same exact policies and achieve the same results?
it is hardly my theory, though I admit to having restated it. you have overstated the theory, however, which speaks only to the growth of the Swiss economy rather than that part of the economy which is entirely self-sustainable. here again one of the many links:

http://www.ehes.org/EHES_No27.pdf
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  #1383  
Old 16.12.2014, 21:59
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Re: Repercussions of Vote Already Starting...

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i have to agree with crazygringo, it is no secret that the success of switzerland is founded on banking secrecy and tax avoidance.
This is not what crazygringo wrote and it is not what I wanted a source for.

I will make one last attempt at the "common knowledge" part. Again . Please think about these questions:
  1. What do you think you know?
  2. Why do you think you know it? Have you read it in a book? Seen it on TV? Has anybody told you about it? Did you establish it in an experiment?
  3. Why do you believe that knowledge to be true? Is it because you learned that knowledge from a trustworthy source? Have you yourself gathered the data and analysed it? Have you seriously thought about the validity of the gathered data and the analysis and did you come to the conclusion that this must be the truth and no major mistakes have happened?

Can you answer these three questions? Then please provide me the source from 2. so that I can think about 3. myself and we can heave a meaningful discussion. If you can not answer these questions, but insist on this being "common knowledge", I would really like to hear your interpretation of "knowledge".

Minds are tricky things. Sometimes we confuse facts with fiction and the brain fills in the gaps to make a memory coherent. Sometimes we misinterpret the information altogether and very often we fall victim to honest mistakes or deliberate deception. Here is a list of things that many people consider "common knowledge", yet are proven to be wrong.

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anyone with a moderate interest in this should be able to educate themselves quite quickly. i find it surprising that one of the hottest topics in EU-Swiss relations seems to have passed many of you by:

https://www.walderwyss.com/publications/1337.pdf
I read the whole thing. There is no data on foreign investments, their influence on the GDP or jobs created because of it in it. Neither does it include any information about how these foreign investments are depending on the bilaterals. Why do you think this is the source I asked for?

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Numbers are much more secretive, but many some are announced publicly:

http://www.fr.ch/ww/de/pub/functions...l&NewsID=49088

others can be reverse engineered from the inter-cantonal payments, or inferred from the number of companies re-domiciling to benefit from favourable tax regimes (take a look at schaffhausen).
I was asking for information about Switzerland and its foreign investments, their influence on economic growth and the potential effect of the EU cancelling the bilaterals. Your link is about the USR III in Fribourg.

It's getting warmer, but it's still quite cold.
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  #1384  
Old 16.12.2014, 23:35
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Re: Repercussions of Vote Already Starting...

From today's press release by the EU council of Ministers (Strong stuff);

The Council has taken note of the outcome of the vote in Switzerland on a popular initiative
"Against Mass Immigration" on 9 February 2014, as well as of the implementation concept
presented by the Swiss Government in June 2014.
While fully respecting the internal
democratic procedures of Switzerland, the Council reconfirms the negative reply in July 2014
to the Swiss request to renegotiate the Agreement.
It considers that the free movement of
persons is a fundamental pillar of EU policy and that the internal market and its four
freedoms are indivisible. The Council confirms its view that the planned implementation of
the result of the vote threatens to undermine the core of EU-Switzerland relations, namely
the so-called "bilateral I agreements", and casts doubt on the association of Switzerland to
the Schengen and Dublin acquis and the participation of Switzerland in certain EU
programmes.
The Council also takes note of the resounding rejection of very strict limits to
immigration as foreseen by the so-called "Ecopop" initiative of 30 November.


46. The EU expects Switzerland to honour its obligations arising from the Agreement on the free
movement of persons and the other agreements concluded with the EU. Furthermore, the
Council expects Switzerland to fully ensure that EU citizens working or living on its territory,
regardless of the moment of settlement and taking up employment in Switzerland, can
exercise or continue to exercise their acquired rights without any restriction, and with the
guarantee that the outcome of the popular initiative would not have a negative impact on
them.
In case of infringements of the above principles, the Council reserves its right to put an
end to the abovementioned institutional negotiations and other internal market related
negotiations.

47. The Council strongly regrets that following the popular vote of 9 February, Switzerland was
no longer in a position to sign the Protocol extending the Agreement on the Free Movement
of Persons to Croatia.
The Council has taken note that Switzerland has unilaterally
introduced measures to avoid discrimination of Croatian citizens. However, the Council
remarks that Croatian nationals working or living in Switzerland are discriminated, as these
unilateral measures fall short of the provisions of the Protocol and, contrary to citizens from
other Member States, Croatian nationals cannot rely on an international agreement.
The
Council reaffirms that the principle of non-discrimination, including equal treatment of all EU
Member States, the right to exercise an economic activity and reside on the territory of the
other party, as well as the standstill clause, constitute the essential basis of the EU's consent
to be bound by the Agreement on the free movement of persons.
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  #1385  
Old 16.12.2014, 23:44
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Re: Repercussions of Vote Already Starting...

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I was asking for information about Switzerland and its foreign investments, their influence on economic growth and the potential effect of the EU cancelling the bilaterals. Your link is about the USR III in Fribourg.

It's getting warmer, but it's still quite cold.
part of what I do for a living involves papering up holdco and other MNC structures in Europe, including papering up intercompany funds flows to avoid trapped cash and other tricky issues. the link I posted for a second time directly above your post will provide you with reasonably robust data and analysis regarding the Swiss approach to cross-border taxation and banking secrecy for the period between the World Wars, which is admittedly dated but the data and analysis have not materially changed in nearly 100 years.

let's start with this (assuming I can paste it correctly), which is 2012 data prepared by the US Department of Commerce. This shows foreign direct investment data regarding US companies. I have not included data for all countries, but rather have focused on Luxembourg and Switzerland (as 2 of the typical conduits for tax-efficient capital structures) and Germany (as one of the typical victims of tax-efficient capital structures).

Table I.A 1. Selected Data for Foreign Affiliates in All Countries in Which Investment Was Reported

Number of affiliates with assets, sales, or net income (+/-) greater than $25 million
Total Assets
Sales (thousands)
Net Income
Number of employees
Compensation of Employees

Germany 1,593 956,596 380,770 14,052 54,653 683.4
Luxembourg 735 1,774,333 39,324 (D) (D) 13.9
Switzerland 645 693,604 306,866 56,246 13,054 114.2

these numbers should tell you a couple of things:

1. the net margins of US companies in Germany do not justify investment in Germany, UNLESS those companies are obtaining additional margins elsewhere. 3.6% will not clear the investment hurdle rate of even the worst-run company, but that 3.6% would be awfully close to a typical cost-plus or similar transfer pricing model for sales through Switzerland.

2. the amount of assets in Luxembourg seems terribly out-of-whack, considering that the country has virtually zero manufacturing and fewer than 500,000 residents. it makes sense, however, when you consider that Luxembourg's appeal as a tax haven is driven in large part by the country's ridiculously-favorable treatment of dividends on equity, i.e. those assets are paper in nature. this also explains why sales out of Luxembourg would be so small, because the country is popular for dividend structures but far less useful as a conduit for interco sales structures because you simply can't fit enough employees within the borders to meet OECD guidelines for those kind of structures.

3. Switzerland has nearly the same level of sales as Germany, despite having less than 2/3 of the asset base, and its net margins are nearly 6 times that of Germany. the numbers should also tell you that the employees are compensated more heavily. in short, these numbers are pretty consistent with my original post and the use of Switzerland as a means funneling margins for purposes of tax-efficiency.

here, as well, is a short summary of MNC employment figures in Switzerland. you will see that MNC employment accounts for a little more than 25% of the jobs in Switzerland, and MNC employment by non-Swiss companies accounts for a little more than 10% of the jobs in Switzerland. if you consider that most economists (even though I hate economists) think 1 direct job resulting from foreign investment results in the creation of 1 to 1.5 additional jobs (in services, etc.), that would suggest that the jobs created by foreign investment of MNC's in Switzerland accounts for something over 20% of all jobs in the country.

http://www.swissholdings.ch/fileadmi...ortunities.pdf
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  #1386  
Old 17.12.2014, 00:05
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Re: Repercussions of Vote Already Starting...

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part of what I do for a living involves papering up holdco and other MNC structures in Europe, including papering up intercompany funds flows to avoid trapped cash and other tricky issues. the link I posted for a second time directly above your post will provide you with reasonably robust data and analysis regarding the Swiss approach to cross-border taxation and banking secrecy for the period between the World Wars, which is admittedly dated but the data and analysis have not materially changed in nearly 100 years.
I've seen this and it is 70 years old. The world has changed a lot in the meantime. We can continue to discuss this topic based on this data if you provide reasonable proof for your claim that nothing has changed in this regard during the last 70 years.

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let's start with this (assuming I can paste it correctly), which is 2012 data prepared by the US Department of Commerce. This shows foreign direct investment data regarding US companies. I have not included data for all countries, but rather have focused on Luxembourg and Switzerland (as 2 of the typical conduits for tax-efficient capital structures) and Germany (as one of the typical victims of tax-efficient capital structures).

Table I.A 1. Selected Data for Foreign Affiliates in All Countries in Which Investment Was Reported

Number of affiliates with assets, sales, or net income (+/-) greater than $25 million
Total Assets
Sales (thousands)
Net Income
Number of employees
Compensation of Employees

Germany 1,593 956,596 380,770 14,052 54,653 683.4
Luxembourg 735 1,774,333 39,324 (D) (D) 13.9
Switzerland 645 693,604 306,866 56,246 13,054 114.2

these numbers should tell you a couple of things:

1. the net margins of US companies in Germany do not justify investment in Germany, UNLESS those companies are obtaining additional margins elsewhere. 3.6% will not clear the investment hurdle rate of even the worst-run company, but that 3.6% would be awfully close to a typical cost-plus or similar transfer pricing model for sales through Switzerland.

2. the amount of assets in Luxembourg seems terribly out-of-whack, considering that the country has virtually zero manufacturing and fewer than 500,000 residents. it makes sense, however, when you consider that Luxembourg's appeal as a tax haven is driven in large part by the country's ridiculously-favorable treatment of dividends on equity, i.e. those assets are paper in nature. this also explains why sales out of Luxembourg would be so small, because the country is popular for dividend structures but far less useful as a conduit for interco sales structures because you simply can't fit enough employees within the borders to meet OECD guidelines for those kind of structures.

3. Switzerland has nearly the same level of sales as Germany, despite having less than 2/3 of the asset base, and its net margins are nearly 6 times that of Germany. the numbers should also tell you that the employees are compensated more heavily. in short, these numbers are pretty consistent with my original post and the use of Switzerland as a means funneling margins for purposes of tax-efficiency.

here, as well, is a short summary of MNC employment figures in Switzerland. you will see that MNC employment accounts for a little more than 25% of the jobs in Switzerland, and MNC employment by non-Swiss companies accounts for a little more than 10% of the jobs in Switzerland. if you consider that most economists (even though I hate economists) think 1 direct job resulting from foreign investment results in the creation of 1 to 1.5 additional jobs (in services, etc.), that would suggest that the jobs created by foreign investment of MNC's in Switzerland accounts for something over 20% of all jobs in the country.

http://www.swissholdings.ch/fileadmi...ortunities.pdf
Thank you for taking the effort! This is the way to go. We finally have a base for a reasonable discussion based on this data, instead of merely gossiping and sympathy-thanking. I don't have time to discuss this in detail right now. I will do so tomorrow - Obviously I have to read through the material first.
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  #1387  
Old 17.12.2014, 00:21
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Re: Repercussions of Vote Already Starting...

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part of what I do for a living involves papering up holdco and other MNC structures in Europe,.........
Sorry to shorten this; just wanted to quote Matthew 7:6

That is more than 70 years old but still relevant
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Old 17.12.2014, 08:23
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it is hardly my theory, though I admit to having restated it. you have overstated the theory, however, which speaks only to the growth of the Swiss economy rather than that part of the economy which is entirely self-sustainable. here again one of the many links:

http://www.ehes.org/EHES_No27.pdf
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part of what I do for a living involves papering up holdco and other MNC structures in Europe, including papering up intercompany funds flows to avoid trapped cash and other tricky issues.
So you could set up holding companies in any number of countries; Lichtenstein, Monacco, Caymens, Cyprus, Malta, etc. With competitive tax rates. Are you saying Switzerland offered the best rates? Surely there were other intangible values Siwtzerland offerred, which you have not disclosed. What are they? Why Switzerland? And have other havens grown at the same rate as Switzerland, and why have they not?
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Old 17.12.2014, 11:29
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So you could set up holding companies in any number of countries; Lichtenstein, Monacco, Caymens, Cyprus, Malta, etc. With competitive tax rates. Are you saying Switzerland offered the best rates? Surely there were other intangible values Siwtzerland offerred, which you have not disclosed. What are they? Why Switzerland? And have other havens grown at the same rate as Switzerland, and why have they not?
yes, you can set up holding companies in several places, but Switzerland's size permits it to approach the structures differently. each of the other countries you listed is more or less the same as Luxembourg, they are far more reliant on a pure holding company approach because they lack the geographical scope and population size to make an intercompany sale approach doable. Switzerland offers a holding company conduit, as well, but the manner in which it is implemented is different because Switzerland is large enough to accommodate more than just a simple holding company and dividend approach.

P.S. all of this information, and much, much more regarding offshore and tax-efficient capital structures, is publicly-available through some reasonably simple Google searches. you could also probably browse the yellow pages in Zug, Zuerich or Geneva and find literally dozens of firms who will be more than happy to sit down and discuss how these structures work and where the risks / rewards lie. there really is nothing more I can share on the EF that will convince you, to the extent you are not already convinced or inclined to be convinced. and, just to repeat, I am not saying that there is anything at all "wrong", "unethical" or anything else with Switzerland's model, only trying to highlight some of the realities around the country's model and how that model compels reliance on foreign investment and access to foreign trade markets.
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Old 17.12.2014, 11:46
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Re: Repercussions of Vote Already Starting...

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yes, you can set up holding companies in several places, but Switzerland's size permits it to approach the structures differently. each of the other countries you listed is more or less the same as Luxembourg, they are far more reliant on a pure holding company approach because they lack the geographical scope and population size to make an intercompany sale approach doable. Switzerland offers a holding company conduit, as well, but the manner in which it is implemented is different because Switzerland is large enough to accommodate more than just a simple holding company and dividend approach.

P.S. all of this information, and much, much more regarding offshore and tax-efficient capital structures, is publicly-available through some reasonably simple Google searches. you could also probably browse the yellow pages in Zug, Zuerich or Geneva and find literally dozens of firms who will be more than happy to sit down and discuss how these structures work and where the risks / rewards lie. there really is nothing more I can share on the EF that will convince you, to the extent you are not already convinced or inclined to be convinced. and, just to repeat, I am not saying that there is anything at all "wrong", "unethical" or anything else with Switzerland's model, only trying to highlight some of the realities around the country's model and how that model compels reliance on foreign investment and access to foreign trade markets.
I know about these structures, Dutch triangles and such, or whatever they may be called now. I have met some of the early practitioners of these structures from the early 70's. It is used extensively by Hollywood studios for structuring their film production, merchandising and distribution. My only point is that there is more to Switzerland's success than its taxation and privacy laws. The same thing can be accomplished in the UK or New Jersey. Yet those other places have not managed to accrue the same growth. I think there are some cultural and historical aspects of Switzerland that account for its prosperity than simply taxation and secrecy.
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Old 17.12.2014, 11:51
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Germany 1,593 956,596 380,770 14,052 54,653 683.4
Thank you.

Is there a typo in the numbers for DE? To me this reads as 380mln sales vs 683.4(k?) compensation, the latter seems odd whether it's thousands or millions.
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Old 17.12.2014, 11:55
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Thank you.

Is there a typo in the numbers for DE? To me this reads as 380mln sales vs 683.4(k?) compensation, the latter seems odd whether it's thousands or millions.
good catch and sorry, I listed the number of employees and employee compensation in the title listing backwards. the 683.4 is number of employees, and is in thousands.
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  #1393  
Old 17.12.2014, 12:02
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I know about these structures, Dutch triangles and such, or whatever they may be called now. I have met some of the early practitioners of these structures from the early 70's. It is used extensively by Hollywood studios for structuring their film production, merchandising and distribution. My only point is that there is more to Switzerland's success than its taxation and privacy laws. The same thing can be accomplished in the UK or New Jersey. Yet those other places have not managed to accrue the same growth. I think there are some cultural and historical aspects of Switzerland that account for its prosperity than simply taxation and secrecy.
well, Luxembourg is certainly growing but in general you're right, and I hope I did not create the impression that I thought all of Switzerland's success was a result of banking secrecy and tax structuring. Switzerland's decentralized government certainly helps, and there is no question that its infrastructure - not just physical infrastructure, but also its excellent university education system and the ease of attracting top Swiss and foreign talent into the country - is a major attraction.
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Old 17.12.2014, 12:08
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Re: Repercussions of Vote Already Starting...

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I know about these structures, Dutch triangles and such, or whatever they may be called now. I have met some of the early practitioners of these structures from the early 70's. It is used extensively by Hollywood studios for structuring their film production, merchandising and distribution. My only point is that there is more to Switzerland's success than its taxation and privacy laws. The same thing can be accomplished in the UK or New Jersey. Yet those other places have not managed to accrue the same growth. I think there are some cultural and historical aspects of Switzerland that account for its prosperity than simply taxation and secrecy.
About "The same thing can be accomplished in the UK " Not really, UK is too large.

Assume, for example, UK has 1 million businesses paying tax and the UK cuts business taxes in half to bring in foreign businesses. Then the UK receives only half the tax revenue and so has to bring in 1 million new foreign businesses just to break even.
Switzerland is around one tenth the size of UK so needs far fewer new foreign businesses for this to work
About "The same thing can be accomplished in the New Jersey". I believe Delaware has already captured this market. Anyway New Jersey is probably also too big for this too work (the second-wealthiest U.S. state) plus they concentrate on the gambling industry.
Forgot to add, cutting business taxes for the casinos and associated businesses would not be a smart move.
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Old 17.12.2014, 12:22
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About "The same thing can be accomplished in the UK " Not really, UK is too large.

Assume, for example, UK has 1 million businesses paying tax and the UK cuts business taxes in half to bring in foreign businesses. Then the UK receives only half the tax revenue and so has to bring in 1 million new foreign businesses just to break even.
Not if the UK choses to develop in a federal direction, with devolved regional governments being given wide-sweeping powers to set their own policies, budgets and taxation.

Switzerland is not just competing with other countries, but Switzerland's cantons are competing with one another in the attempt to attract lucrative individuals and companies and each canton has its own particular strengths and weaknesses. Its not only about costs but of course costs matter.
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Old 17.12.2014, 12:26
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Not if the UK choses to develop in a federal direction, with devolved regional governments being given wide-sweeping powers to set their own policies, budgets and taxation.

Switzerland is not just competing with other countries, but Switzerlands' cantons are competing with one another in the attempt to attract lucrative individuals and companies and each canton has its own particular strengths and weaknesses. Its not only about costs but of course costs matter.
Good points
Especially "Switzerlands' cantons are competing with one another......"
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Old 17.12.2014, 12:26
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Re: Repercussions of Vote Already Starting...

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About "The same thing can be accomplished in the UK " Not really, UK is too large.

Assume, for example, UK has 1 million businesses paying tax and the UK cuts business taxes in half to bring in foreign businesses. Then the UK receives only half the tax revenue and so has to bring in 1 million new foreign businesses just to break even.
Switzerland is around one tenth the size of UK so needs far fewer new foreign businesses for this to work
About "The same thing can be accomplished in the New Jersey". I believe Delaware has already captured this market. Anyway New Jersey is probably also too big for this too work (the second-wealthiest U.S. state) plus they concentrate on the gambling industry.
Forgot to add, cutting business taxes for the casinos and associated businesses would not be a smart move.

As I recall, the UK set up free-tax zones where they don't tax any income earned outside of the UK. The Isle of Man, I think, which I believe is part of the UK.
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Old 17.12.2014, 12:31
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Re: Repercussions of Vote Already Starting...

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As I recall, the UK set up free-tax zones where they don't tax any income earned outside of the UK. The Isle of Man, I think, which I believe is part of the UK.
The Isle of man is not part of the UK but has a range of agreements with the UK that can be broadly compared to the EU's bilaterals with Switzerland, but go a bit further. Thus the Isle of Man entrusts its diplomatic and consular services to the UK and by special arangement shares UK currency. It also acknowledges the Queen as head of state and adopts UK industrial norms, standards and units of measure. But there is no full political union with the UK (and as far as I know, there never has been). The Isle of Man's parliament (called the Tynwald) is possibly the oldest continuously functioning democracy, going back to Viking times.
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Old 17.12.2014, 12:34
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Re: Repercussions of Vote Already Starting...

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As I recall, the UK set up free-tax zones where they don't tax any income earned outside of the UK. The Isle of Man, I think, which I believe is part of the UK.
Also Channel Islands, British Virgin Islands, Cayman Islands.
Not sure what your question is any more?
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Old 17.12.2014, 12:36
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Re: Repercussions of Vote Already Starting...

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Also Channel Islands, British Virgin Islands, Cayman Islands.
Not sure what your question is any more?
My point is that money laundering alone does not account for Switzerland's prosperity and success. There! I said it.
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