Bankers and Socialists Clash Over a Swiss Tax Break

Switzerland offers a sweet deal to the wealthy foreigners who live there: They can pay a flat fee—called a forfait—to their local canton and avoid paying any income tax. Now that system is coming under attack, and Swiss bankers are concerned that scrapping the forfait will scare off their best clients.

Two of the nation’s 26 cantons have already abandoned the system. Appenzell Ausserrhoden will become the third on Jan. 1, and Basel will follow 12 months later. In October, the Socialist Party—the second-largest of Switzerland’s four major parties—along with the Alternative Left party and two labor unions presented a petition with more than 103,000 signatures to the Swiss Parliament, calling for the “abolition of scandalous tax privileges for foreigners.” The petition may lead to a parliamentary debate by 2015 and a national referendum on the question within 10 months after that.