Geneva is known for having one of the highest densities of millionaires per capita in the world. But recently, it has been running a budget deficit, and it’s having a hard time keeping up with the growing strength of the Swiss franc, making many companies reconsider the area as their European headquarters.
In January, the Swiss central bank surprised everyone by eliminating its currency cap with the euro, boosting the franc by 21 per cent. Almost a year before that, a popular vote lead to new measures aimed at stopping mass immigration. Couple these events with the European Union forcing Switzerland to get rid of its preferential tax rates for foreign firms, and you’re left with a lot of upheaval that has compromised the political and economic stability that once enticed hundreds of multinational companies to headquarter themselves in Geneva.
The local government is now looking for new ways to attract millionaires and multinational companies. Just four years after Geneva said it was running out of room for hedge funds, the canton has announced that it is developing its first ever strategic economic plan.
Part of re-creating stability in the area will be accelerating the tax reform process. Geneva is already lagging behind neighboring canton Vaud in regards to implementing tax reforms set forth by the EU. Vaud has already proposed a new corporate rate of 13.8 percent.
The implementation of these reforms will have their own repercussions, namely that they will increase the deficit which is already expected to hit 200 million francs ($207 million) for 2015. Many worry that if Geneva doesn’t find a way to lower their tax rates, there could be a mass exodus, and consequently, more instability in the area.
In 2014, 35 foreign companies set up shop in Geneva. While that’s up from the 30 companies that arrived in 2013, last year’s companies only created 170 jobs, and of those jobs created, most are executive level. One of the biggest draws for new companies is the executive level talent that Geneva has to offer. With so many successful companies headquartering in the same town, it’s easy to see why companies in need of experienced management would want to get their head in the game.
While some are worried about the future of Geneva, it’s important to keep in mind that Geneva is still ranking third worldwide for the density of millionaires per capita in 2015, trailing behind only Zurich and Monaco.