* World's no. 3 commods trader shifts business to Asia
* Secrecy, tax advantages both seen under threat
* Geneva ranked 5th most costly city, Singapore 6th
* Swiss defend sector with Masters course, new lobby
By Emma Farge
GENEVA, June 22 Switzerland's low corporate
taxes, business-friendly regulations and reputation for
discretion have attracted multinational commodities trading
firms "as a dunghill attracts flies".
This is how The Berne Declaration - a Swiss NGO which
campaigns to ensure local companies act responsibly - describes
Switzerland's appeal in a new book that aims to shed light on
the methods of an industry that traditionally prefers to conduct
its business away from the gaze of regulators and journalists.
But that may be changing. The country's pre-eminent position
in commodities is under threat from Singapore just when it most
needs the business after a series of blows to its banking
In one of the highest-profile moves, the world's no. 3
commodities trader Trafigura said in May it is shifting its
trading centre and a key executive to the city state.
One of Singapore's attractions is that unlike land-locked
Switzerland, it sits at the centre of Asia's booming demand for
raw materials, close to many key physical markets.
But Singapore is also beating Switzerland at its own game -
"Singapore has become more attractive than Switzerland on
tax. There's no doubt about it," said Benjamin Knowles, a
London-based partner advising commodities firms for Clyde & Co.
Official corporate tax rates in Singapore have fallen by
around 3 percent to 17 percent over the past five years but held
steady at just above 21 percent in Switzerland, according to
accountancy firm KPMG.
What really matters for global traders is the rate they can
Industry sources say it is now tough for new firms to
negotiate tax rates in Switzerland below the official 10-12
percent rate usually granted to "holding companies", whereas
traders in Singapore can get a 5-10 percent rate via the Global
The Singapore scheme has been in place since 2001 and has
been regularly broadened, for example in 2011 when income from
derivatives was added, considered a key factor in the Trafigura
Tax breaks may be tougher to come by as Switzerland faces
growing pressure from the European Union, which says that some
cantonal tax agreements - 'fiscal holidays' which can slash
federal taxes in half over five-year periods - amount to
unauthorised state aid.
Boston Consulting Group said in a study published this month
that Swiss talks with EU authorities over tax were causing
concern among some multinational firms in the cantons, or
states, of Geneva and Vaud. The companies typically review the
pros and cons of their location every five years.
"Many features that have made these cantons appealing to
multinational companies are in decline ... Geneva and Vaud
cannot afford to assume that the past success with multinational
companies will continue," the study said.
Swiss cantons, which compete with each other to attract
firms, have been warned to expect more rigorous federal audits
of companies seeking renewals of cantonal tax breaks after a
dispute between Switzerland and Brazilian mining company Vale
Swiss authorities are fighting to recoup what they say are
212 million Swiss francs ($221.75 million) in unpaid back taxes
over five years from Vale after tax officials said it had not
honoured its commitments under the deal.
"I imagine that this will drive some multinationals to think
twice before setting up shop here," Vale SA President Renato
Neves said in a recent interview with Swiss paper Le Temps.
Geneva is currently the world's number one centre for oil
trading with around 35 percent of global volume versus 25
percent in London, 20 percent in New York and Houston and 15
percent in Singapore, according to Geneva's Trading and Shipping
Geneva also holds the top spot in grains with 35 percent of
volume. Singapore is in second place with 20 percent.
Location, living costs, the Swiss franc and lifestyle all
also work to Switzerland's disadvantage for some commodities
Last year the Swiss franc soared some 20 percent in a few
months because of alarm over euro zone debt, and is still under
pressure despite a cap placed last September.
Clyde & Co.'s Knowles said Singapore's position as a
shipping hub means "it has warehouses and storage. It is very
different from somewhere like Geneva which has no real reason,
beyond tax advantages, from being a trading centre."
Larry Sim, a tax partner at KPMG in Singapore, agreed.
"Companies want to be closer to where their customers are,"
he said. "If all the action is in Asia, it makes sense to be
Expensive housing and long waiting lists at schools are
issues in both countries, but advantages such as cheap domestic
help can make Singapore attractive for families.
"If you are ready to live far away from your relatives, it's
heaven," said Frederic, an oil trader who transferred from
Europe to Singapore in 2011 with his family and asked to be
identified by his first name only.
"Everybody in my company wants to move there - it's the most
Geneva ranked no. 5 in Mercer's cost of living index in
2011, against Singapore at six and London at 25.
Singapore also has an army of qualified, educated locals for
trading and support positions, whereas an 'inadequately educated
workforce' topped the World Economic Forum's list of problematic
factors to doing business in Switzerland.
Harry, 29, who moved from Singapore to Geneva in 2010,
described the move as "a major anticlimax".
"Accommodation is not a patch on Singapore. You don't get
pools and gyms in your building as standard. Restaurants are
often shut and nightclubs are few and terrible," he said.
Gary Klesch, an investor in oil refineries and founder of
Geneva-based commodities trading firms SOTASSA and Panther
Trading, said it was becoming increasingly hard to lure
"You have to bring the traders here, so first of all you
have to pay them more. And then when they get here they are
still unhappy because they realise they have to mortgage their
house to buy a Starbucks," he said.
The loss of revenues and jobs from commodities trading
houses is hitting Switzerland particularly hard at a time when
it is seeking alternatives to make up for banking losses caused
by a global campaign against tax cheats.
Switzerland's oldest private bank Wegelin was indicted by
the U.S. Justice Department in February for enabling wealthy
Americans to evade taxes, prompting some rich foreigners to
withdraw funds from secret accounts.
In 2009 UBS paid $780 million and admitted to
criminal wrongdoing to resolve U.S. criminal charges over its
tax evasion services.
Daniel Loeffler, director of economic development in Geneva,
said his department was counting on a narrowing gap between
revenues from trading firms, which represent around 10 percent
of cantonal GDP, and those from private banking, at 20 percent.
Efforts are being made to fight back: the University of
Geneva, for example, is offering a Masters programme in
International Trading, Commodity Finance and Shipping to
increase the number of trained Swiss-based staff.
A new lobby group, the Zug Commodity Association, will meet
this month to forge a common position on what it considers key
dangers to the Swiss industry, such as tax reform.
The factors that make Switzerland competitive, like
confidentiality and favourable taxation, must be defended, a new
interest group called 'Swiss Respect' said a letter to the
"Switzerland is losing its assets one by one. We refuse to
follow this destruction of value ... Nothing can give back to
Switzerland that which it has lost over these past three years.
However, it is not too late to raise our heads and fight