The Federal Council has published its Message concerning the popular initiative tabled by the Socialist Youth for the taxation of estates worth over CHF 50 million opened in Switzerland at a rate of 50% (known as the “Climate Protection Initiative”). It states that no “exit tax” will be imposed on individuals who leave Switzerland after the vote, but before the implementing legislation is passed.
The popular initiative “for climate protection” has been much talked about in recent months, and will continue to be in 2025. Its aim is to tax estates opened in Switzerland at a rate of 50%, after application of an excess of CHF 50 million.
One of the central questions is whether, if the text is accepted by the people, an “exit tax” could be applied to anyone leaving Switzerland from the day of the vote (as requested by the Socialist Youth), to be levied on the basis of an Ordinance to be published by the Federal Council (FC), even before Parliament passes the law implementing the Initiative.
On Friday December 13, 2024, the Federal Council published its Message on the Initiative. As expected, it proposes to reject the Initiative. In particular, it highlights the catastrophic tax consequences for Switzerland, given that more than 85% of those affected by taxation at over 50% would leave Switzerland if the text were accepted. In concrete terms, this means that the revenue generated by the implementation of the Initiative would be wiped out by the heavy losses these departures would cause in terms of income and wealth tax.
In its Message, the FC states that there is no question of levying an “exit tax” in the event of departure from Switzerland following the vote. According to the FC, a departure from Switzerland would not per se constitute a case of qualified tax evasion justifying the levying of an exit tax. For a tax to be levied on a person leaving Switzerland, he or she would at least have to make a substantial donation shortly after leaving. The FC refers to a donation within a maximum of 5 years, while noting that, even in such a case, Switzerland would in all likelihood not be legally in a position to levy the tax on a now-resident foreigner (for lack of competence to directly enforce any tax claim abroad, and of the existence of treaties enabling it to enforce the claim by the foreign authority).
The FC’s stance is welcome, as it means that if the initiative is accepted, an individual at risk of falling under its scope would have time to consider a possible move abroad before the implementing legislation comes into force. The position expressed by the FC can be considered as offering solid guarantees. This is insofar as the enactment of the implementing ordinance would be a matter for the Federal Council alone, and thus only a diametrical change of position by the same Federal Council could result in an exit tax being levied in spite of everything.
It should be noted, however, that these application procedures offer no protection in the scenario where a person concerned by the tax were to die between the adoption of the text by the Swiss people and the adoption of the implementing law by Parliament.
Finally, in its Message, the FC points out that, contrary to certain opinions expressed to date, the Initiative is not unconstitutional, which seems a priori to rule out its being invalidated by Parliament. It can therefore be expected that the Swiss people will already be called upon to vote on the text on November 30, 2025.
