THE 80% TAX: HOLLANDE DREAMED IT, FRENCH-SPEAKING SWITZERLAND MADE IT HAPPEN
Vaudois entrepreneur Marc Ehrlich denounces the confiscatory tax treatment of SME owners and calls for political action.
Switzerland, a tax hell?
That statement may come as a shock to our European neighbors, for whom the Swiss stereotype is a forty-something banker, Cohiba cigar in hand, casually driving his SL 63 AMG while on a conference call with his tax-exiled clients, piling up wealth insolently, all while paying little to no taxes, in the country with the highest average salary in the world.
A charming picture… swap the cigar for something healthier and shave off ten years, and I wouldn’t mind fitting the role myself.
But reality tells another story for those bold, or reckless, enough to become entrepreneurs in Switzerland (also the most expensive country in the world).
An excellent piece published in Le Temps lays out, with impressive clarity, just how absurd cumulative taxation can become here. The lesson: if you’re an entrepreneur, don’t be domiciled in your own country and, better yet, own nothing at all.
The warning is hardly new. I recall the words of a friend, a chartered accountant, who told me 15 years ago: “If your business really takes off, get out of Switzerland fast, otherwise you’ll be fiscally slaughtered.”
Thankfully, legal solutions do exist for those who think globally.
By Alain Farrugia
“Some regard the entrepreneur as a wolf to be shot, others as a cow to be milked without end. Few see him as the horse pulling the cart.”
Attributed to Winston Churchill
Does this quote ring particularly true in French-speaking Switzerland?
Across the political spectrum, from left to right, everyone praises SMEs as the backbone of the economy. But what about the entrepreneurs behind them?
“Taxes eat up 80% of my time and energy”
I’m a Vaudois entrepreneur, my company employs 170 people. Like everyone else, I start the year on January 1st. But until roughly October 19, every franc I earn goes straight to taxes. In practice, taxes consume 80% of my time and energy.
How is this possible in a country seen abroad as a tax haven, where marginal rates hover around 30 - 40%, and where the far-left endlessly complains about generous breaks for wealthy shareholders?
The entrepreneur’s blind spot
Here’s the catch: entrepreneurs are taxed not only on income, but also on wealth. On the surface, fair enough, it applies to everyone.
But entrepreneurial wealth is not like a stock portfolio. Most of it is tied up in company shares, assets that cannot easily be split or sold. Who would buy 5% or 10% of a private company, with no control rights and no easy resale?
The result: entrepreneurs are often forced to sell their businesses outright just to free up cash to pay taxes, regardless of how well the company is actually doing.
The “personal tax” trap
Take a concrete example: a company has owned 10,000 m² of industrial land for 20 years. Thanks to rising real estate prices, the land is now worth 10 million francs. That valuation directly inflates the company’s worth and, by extension, the entrepreneur’s taxable wealth.
The annual wealth tax bill? Roughly 80,000 francs. To cover it, the entrepreneur must withdraw around 130,000 francs from the company, adding income tax and social charges on top of the wealth tax itself. Even in tough years, the obligation remains.
Meanwhile, most of the entrepreneur’s money is reinvested in the business. Taxing that capital as if it were idle wealth discourages growth, job creation, and innovation. Nike’s slogan “Just do it” here translates to: “Do it, but not too much.”
A European anomaly
Let’s not forget: Nestlé, Roche, Novartis - Switzerland’s corporate giants, all started with entrepreneurs. They scaled their companies to everyone’s benefit.
So how does the effective 80% tax rate take shape? In Vaud, a cap limits total tax to 60% of taxable income. Add the federal tax (12%) and mandatory social charges, and the burden climbs steeply. Geneva and Valais are not much different.
This is unique in Europe. In France, hardly a fiscal paradise, François Hollande once campaigned on a 75% tax on ultra-high incomes, but as president he abandoned it, fearing it would be confiscatory. Hollande merely dreamed of it French-speaking Switzerland made it real. Even France’s wealth tax (ISF) excluded business assets from its calculations.
Pragmatic solutions exist
One fix would be simple: apply a reduced coefficient (around 20%) to qualified shares (ownership above 10%). This would not only allow entrepreneurs to grow their companies but also encourage private wealth to flow into startups and SMEs.
Zurich has already embraced this logic, passing legislation to offer more favorable tax treatment for investments in startups. A similar motion was introduced in the Swiss Parliament by Fathi Derder in 2015.
But until reform arrives, Switzerland risks losing its entrepreneurial fabric. After the high-profile sale of Serono to Germany’s Merck in 2007, followed by the closure of its Geneva site in 2012, how many quiet sales of smaller
SMEs to foreign groups will it take before policymakers wake up?
SMEs are the real economic backbone of the region. And when they’re sold, layoffs often follow, though rarely in numbers big enough to make headlines.
The question remains: when will cantonal authorities finally realize that entrepreneurs should not be the forgotten victims of tax reform? That they are not wolves or cows, but the horses pulling Switzerland’s economic cart?
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