Switzerland and the image of a tax haven

In April 2021, Joe Biden declared during a speech to the Congress that: “a lot of companies also evade taxes through tax havens in Switzerland and Bermuda and the Cayman Islands”. This identification of Switzerland as a tax haven astonished the Swiss Finance Minister Ueli Maurer. He believes that the country “fully respects all its international obligations and is very transparent[1]. These political discourses reveal us that there isn’t a shared view on what constitutes a tax haven.

According to Tax Justice Network (TJN), the emergence of tax havens probably happened even before the establishment of the Swiss Confederation in 1848. Swiss banks in the cantons of Geneva and Zürich could be considered as the first shelters for European’s elite wealth. TJN also mentioned “pirate coves in the Caribbean, the English Channel and elsewhere” for “early offshore” practices[2]. Other research generally perceive the beginning of tax havens in the middle of the 19th in the United Stated. At that time, the states of New Jersey and Delaware were facing financial issues. Thus, New York lawyers advised the governors to attract firms from other states by reducing controls and taxes[3].

However, a recent study demonstrated that even though New Jersey and Delaware recorded a large number of companies in their territories between 1890 and 1914, they are not tax havens at the same extent as Switzerland. The research shows that these American states essentially offered companies “an ultraliberal regime” in which reduction of taxes was secondary. Furthermore, it demonstrates that the US didn’t plan an international strategy to make the country a tax haven as Switzerland did. Moreover, there is evidence that in 1816 Geneva offered privileges to affluent foreigners by exonerating “taxes on wealth income, and sometimes inheritance”. In the 1860s, other cantons pursued the same path with additional advantages like the revocation of taxation on bills of exchanges, establishment of foreign administrative offices (offshore). Consequently, these transformations made Switzerland as an appealing location for international trade and financial operations. In addition, the Swiss banking sector according to the external political factors further developed its model. Swiss banks strengthen its secrecy conditions to attract more foreigners. For example, in 1901, France initiated an “inheritance tax” and a “progressive income tax” which led to the tax evasion of wealthy French citizens to Switzerland[4].

Nevertheless, the study emphasized that Switzerland didn’t voluntarily organize all these changes to create a fiscal paradise. These improvements came from various actors’ strategies and the rivalries between cantons as well as the globalization of finance and trade[5]. World War I also contributed to the flight of European wealth outside their borders. Indeed, Switzerland benefited from its neutrality and its bank secrecy to attract capital from countries involved in the War[6].Therefore, we understand that there is still some debate about the origins of tax havens. We observe that practices related to tax evasion have started in different places in the world to attract wealth in these host countries. Thus, we can assert that Switzerland played historically a major role in the establishment of tax havens.

Today, the discussion is going on how to determinate a state as a fiscal paradise. Indeed, there is not yet a universal definition for a tax haven which led to multiple qualifications by states, media, regional and international institutions. One the one hand, this could be explained by the pressure given to states that are directly impacted by the tax evasion. Indeed, these countries must face difficult financial decisions at the national level. They certainly need to adjust their taxes on their population or endorse the public debt. In addition, this situation increases the competitiveness between companies with an administrative office in a fiscal paradise and SMEs who don’t expand internationally. On the other hand, there is often a misconception about tax havens that it only concerns islands and small countries. Indeed, great powers are also involved with practices related to tax evasion as we saw in the case of American states[7].

According to OECD, a tax haven traditionally means: “a country which imposes a low or no tax, and is used by corporations to avoid tax which otherwise would be payable in a high-tax country”. The organization also further defines a tax haven with these components: “No or only nominal taxes; lack of effective exchange of information; lack of transparency in the operation of the legislative, legal or administrative provisions”[8]. In 2014, OECD exhibits a list of 79 countries into four categories according to their respect of norms for fiscal information exchange cooperation. They classify Switzerland as a “non-conform jurisdiction”. In 2017, the 28 EU Finance Ministers issued a list of 17 countries considered as a fiscal paradise. This inventory was criticized for its bias since none of the EU members or other European countries were mentioned. Oxfam denounced that 35 additional countries should appear on that list like Switzerland, Ireland, Luxembourg, and Netherlands[9]. However, Switzerland was part of the EU grey list of countries who took engagement without improvements. In 2019, Switzerland was officially out of this list since it agreed on a taxation reform following OECD and EU conditions[10].

Therefore, we should understand that defining a state as a fiscal paradise is a way to put pressure on that country to initiate reforms. We also see that Switzerland is doing its best to avoid being labelled as a tax haven since it could impact it negatively. We also observed that the qualification also depends on various indicators.

Besides, events like UBS’s scandals, Panama Papers and Paradise Papers also contributed to the shape the Swiss financial system. According to Tax Justice Network’s report (2020), the Swiss government made considerable changes these past years regarding its secrecy regime. Switzerland agreed to communicate information to “rich and most upper and lower middle-income countries if they have to”. The report also shows that it will let “citizens of the poorer and poorest countries the opportunity to evade their taxpaying responsibilities”[11]. Consequently, this situation demonstrates that pressures from developed countries only serve them while they are neglecting developing countries. To conclude, Finance Ministers from G20 agreed last July on a major tax reform for multinationals[12]. We may observe some radical transformation in the upcoming years.

Edited by Gopiga Arulchelvam

[1] SWISSINFO (2021).


[3] Chavagneux, Christian. 2011. À quoi servent les paradis fiscaux?. Le journal de l'école de Paris du management, 92, 26-33.

[4] Guex, Sébastien. 2021. The Emergence of the Swiss Tax Haven, 1816–1914. Business History Review: 1–20.

[5] Ibidem

[6] Farquet, Christophe. 2019. L’envol du centre financier suisse. Le déplacement de la fortune européene après la Grande Guerre. Une enquête statistique. Université de Fribourg.

[7] Jacques Fontanel. 2019. L’Europe des paradis fiscaux. Université Grenoble-Alpes. Liber Amicorum, Mélanges en l’honneur de Madame la Professeure Catherine Schneider.

[8] OECD. Glossary of Tax Terms,

[9] Jacques Fontanel. 2019. L’Europe des paradis fiscaux. Université Grenoble-Alpes. Liber Amicorum, Mélanges en l’honneur de Madame la Professeure Catherine Schneider.

[10] RTS INFO (2019). La Suisse définitivement retirée de la liste grise des paradis fiscaux,

[11] TAX JUSTICE NETWORK (2020). Financial secrecy index 2020,

[12] LE MONDE (2021). Accord historique des pays du G20 pour une taxation internationale des multinationales,

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