Thursday, December 16, 2010

Swiss net international investment position nears 2007 high

Tax privileges

Foreign companies moving head offices to Switzerland inflate figures

The Lake Geneva region is drawing a growing number of foreign companies for their head offices

Switzerland, which has one of the world’s highest net international investment positions (IIP) in relation to GDP, saw this climb back nearly to 2007 levels in 2009. Its net position rose by CHF95 billion to CHF764b in 2009. Foreign assets climbed by CHF95b to CHF 3,177b. Assets “were still considerably below the level of 2007″, says the Swiss National Bank (SNB).

The figures were released Tuesday morning 14 December by the SNB.

Net IIP is the difference between a country’s external financial assets and liabilities. IIP equals domestically owned foreign assets and foreign owned domestic assets.

“In relation to GDP, the 2009 net investment position increased from 123 percent to 143 percent year-on- year—a very high figure by international standards. At the end of 2007, this key figure was 149 percent,” the SNB notes in its press release. Hong Kong traditionally has a very high figure, above 300 percent, while the United States, for example, was -24 percent, Ireland -58 percent and Greece -75 percent in 2008.

Foreign companies account for nearly half of direct investment

Foreign assets include direct investment, portfolio investment and reserve assets. Direct investment alone rose by CHF85b, with foreign companies moving to Switzerland, included for the first time in these figures, accounting for nearly half that amount, CHF38b. Direct investment rose for two reasons, says the SNB: Swiss companies invested in subsidiaries abroad and foreign companies moved their headquarters to Switzerland.

The growing number of foreign companies moving to Switzerland, many of them from the UK, has drawn fire from British media, most notably with the planned move of Cadbury’s, for tax reasons, in 2011.

The number of employees of Swiss subsidiaries abroad fell by 28,000 in 2009, for a total of 2.63 million, the first such decline since 2003.

The SNB notes that

“by comparison with other countries, Switzerland has relatively high levels of direct investment abroad. This is evident from the ratio of Swiss direct investment abroad to nominal gross domestic product (GDP), which amounted to 164 percent at the end of 2009. In the Netherlands this ratio amounted to 107 percent, while in Ireland it was 85 percent. As recently as 1990, Switzerland had a ratio of 28 prcent and lagged behind both the Netherlands (36 percent) and Ireland (31 percent) (source: Unctad, World Investment Report 2010).”

Income from direct investment abroad rose to CHF53b, up sharply from the 2008 figure of CHF8b, thanks in large part to the banking industry’s recovery.

Derivatives out of favour, high Swiss share prices find investors

Swiss shares held by investors abroad jumped by CHF82b to CHF555b as a result of higher share prices. By contrast, foreign investors scaled back their holdings of Swiss debt securities, notes the SNB. Derivatives and structured products lost favour, and their fall nearly offset the rise in foreign assets.

Swissinfo video on foreign companies moving to Switzerland for tax purposes

Nissan, Yahoo, Chiquita – many multinational companies are moving their European headquarters to Switzerland. Here they pay much lower corporate taxes than in other countries. The international holdings have privileges that not even Swiss firms enjoy. (SF Eco -

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