SWISS VOTE TO EXTEND FREE MOVEMENT OF PERSONS WITH

UNCLAS BERN 000064


E.O. 12958: N/A
TAGS: EFIN PGOV SZ
SUBJECT: SWISS VOTE TO EXTEND FREE MOVEMENT OF PERSONS WITH
EU, CURTAIL TAX BREAKS FOR WEALTHY FOREIGNERS, AND EXPAND
WEF MEETING VENUE IN DAVOS

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EU-SWITZERLAND "FREE MOVEMENT OF PERSONS"
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1. In a nationwide referendum held February 8, nearly 60
percent of the Swiss electorate voted in favor of
maintaining an existing agreement with 25 EU states
allowing for the free movement of persons, while also
extending that agreement to include the newest EU member
states, Bulgaria and Romania. While the referendum had
been expected to pass, the margin in favor was larger than
anticipated for what has been a divisive political issue
within Switzerland. In the run-up to the referendum, the
rightist Swiss People's Party (SVP) conducted a major
public campaign calling for the Swiss electorate to vote
"no", arguing that the question of broadening the agreement
to include Bulgaria and Romania should not have been linked
to the question of maintaining the existing agreement. In
its campaign, the SVP alleged that extending the agreement
would lead to lower Swiss salaries, increased unemployment,
and higher crime.


2. Confronted with such high-profile opposition to the
agreement, the Swiss government drew on the support of key
industries and major political parties (except the SVP) in
its advocacy of the extension, describing the agreement
with the EU Q- Switzerland's most important trading partner
-- as crucial for the Swiss economy and for the export
sectors in particular. Majorities in 22 out of 26 cantons
supported the referendum. The strongest opposition came
from Ticino, where voters seemed to be particularly
concerned with the canton's economic and social inter-
dependence with Milan.

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ZURICH TO ELIMINATE "LUMP SUM" TAX
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3. In a cantonal referendum held also on February 8,
nearly 53 percent of Zurich's voters unexpectedly called
for the elimination of the special "lump sum" taxation
reserved for wealthy foreigners living in Zurich but not
employed in Switzerland. In Zurich and some other Swiss
cantons, wealthy foreigners have the opportunity to
negotiate a confidential tax fee with local authorities
based on their expenditures, instead of paying income tax,
provided that they do not work in Switzerland. The center-
left political parties' in Zurich proposed the elimination
of this tax option that benefits some wealthy foreigners.
The center-right political parties opposed the proposal,
arguing that Zurich would lose revenue to other cantons if
it eliminates the lump sum tax. The referendum result
obliges cantonal authorities to change Zurich's tax laws.
According to press reporting, the parties in favor of the
change hope that the outcome will now send a signal to the
rest of Switzerland. Approximately 140 foreign residents
reportedly utilize the lump sum tax option in Zurich.

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DAVOS VOTERS APPROVE KONGRESS CENTER EXPANISION
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4. The citizens of the mountain resort community of Davos
confirmed the importance of the World Economic Forum (WEF)
Annual Meeting for their local economy by voting in favor
of a USD 33 million extension of the convention facilities
("Kongress Center") used each January for the WEF gathering
(Davos itself reportedly is to cover USD 24 million of the
cost). Spokesmen for the project estimate the construction
work will start in Spring 2009 and should be finished by
the end of 2010. Convention tourism has become a key
source of revenue for Davos, creating approximately 600
jobs and earning the region USD 53 million in 2007. The
WEF Annual Meeting, being DavosQ most high-profile
gathering, accounts for 27,000 overnight stays during the
course of each session. The WEF reportedly has committed
to holding its annual meeting in Davos for at least ten
years after the extension of the convention center.

CARTER