'Schumi plan' means end of the road for Swiss tax breaks

The "Schumi Initiative" - a petition to parliament named after German Formula One racing driving Michael Schumacher, who is currently building a lavish mansion on the shores of Lake Geneva - seeks to put an end to local deals that allow some 3,000 wealthy expats living in Switzerland to negotiate low rates of tax.

Schumacher, who has an estimated fortune of 500 million, is believed to pay less than 10 per cent of his earnings in tax.

He is officially listed as "unemployed" in his adopted homeland, where he moved to from Germany in 1996 to escape crippling income taxes of 42 per cent, coupled with 53 per cent on investments and an extra 5 per cent on his total tax bill to fund the rebuilding of East Germany.

Suzanne Oberholzer, an MP for the Social Democrats, is behind the petition to parliament and has already gained support among other politicians. She said: "We expect a decision in the autumn. It cannot be right for Michael Schumacher and some 3,000 other foreign, rich inhabitants of Switzerland to be free from normal income tax rules.

"It is unfair to the Swiss people and to the people of neighbouring lands who must shoulder their fair share of financial obligations.

"The ability to negotiate these customised deals should go. He should pay his fair share like everyone else."

If the law is successful, Schumacher could end up paying more than 40 per cent tax in total: almost as much as if he moved back across the border to Germany.

Mrs Oberholzer claimed the disparity between rich, foreign tax-payers and the rest of the population was unconstitutional. Her bill says: "The tax situation clearly contradicts the basic law of Switzerland."

She is not certain her initiative will be a success, as much of her country's wealth and allure comes from keeping rich foreigners happy and, of course, rich. But Mrs Oberholzer added: "At the very least we will create the kind of pressure needed to bring a debate that we need about this situation out into the open."

Individual tax deals are not revealed to the public, but other high-profile figures living in Switzerland include Scots Sir Jackie Stewart and David Coulthard, of Formula One racing fame, musicians Phil Collins and David Bowie, along with Canadian singer Celine Dion and former Bond actor Sir Roger Moore, who splits his time between there and London.

Wimbledon legend Boris Becker relocated to Switzerland after being caught cheating on his taxes in his native Germany, fined close to 3 million and given a suspended jail sentence.

When Becker moved after his conviction in Munich two years ago, he said: "Friends have spoken in such glowing terms about the advantages this country has to offer.

"Obviously, I remain loyal to Germany, but over the past three years I have begun to move my business activities to Switzerland and it's only logical that I now also live where I mainly work."

Under Swiss law, different regions, known as cantons, are allowed to set their own tax rates, and Zug's, where Becker now lives, has among the lowest. Schumacher, 36, lives in the canton of Waadt where rates are higher.

He fled Germany when his accountants learned they could cut him a good deal in the land of the numbered bank account and discreet accountants.

One German newspaper yesterday claimed that Schumacher, who earns in the region of 50 million a year, pays 2 million in tax, which would be just 4 per cent of his earnings.

When he moved in 1996, Schumacher told finance magazine Cash: "Switzerland let it be known to me that I could negotiate a sensible tax settlement with them.

"In Germany they are stupid to themselves if they cannot make me an offer and then lose all my tax money."

The Green Party in Switzerland is backing the move to claw back millions in tax from people like Schumacher.

The Social Democrats and Greens make up about 40 per cent of the Swiss parliament.

Cecile Buhlmann, a Green Party MP, said: "I find it utterly scandalous that people like Michael Schumacher pay a fraction of what they should. It shames the little people of this country."

The current maximum federal tax rate in Switzerland is 11.5 per cent with individual cantons having their own tax rate on top, giving them room for significant flexibility to attract high earners to the area with the offer of low tax rates.

But not only the super-rich use Switzerland. Some 50-80 billion in undeclared wealth is estimated to have been stashed in the country - largely by ordinary Germans eager to avoid paying tax on their savings.

This practice has led border police to stop and search cars crossing from Switzerland into Germany and vice-versa, looking for black money.

Three years ago actor Don Johnson, who starred in the American television series Miami Vice, was stopped in a car with two financial advisers and was found to be carrying papers detailing stocks and share deals worth about 8 billion.

ERA OF ISOLATION DRAWING TO A CLOSE

THE centuries-old Swiss policy of neutrality and isolation was a step closer to being dropped yesterday, after voters narrowly decided to abolish passport checks for citizens of 15 European countries.

About 55 per cent of voters, or 1.47 million people, supported joining Europe's passport-free Schengen zone by 2007, a result that was being interpreted as a sign that the Swiss favour closer integration with the European Union.

The Swiss president, Samuel Schmid, hailed the result as backing for the coalition government's policy of developing closer links, but said he would not ignore the large minority that voted against Schengen membership.

"The government sees the people's 'yes' to Schengen as a confirmation of a bilateral approach to Europe," he said.

In a two-issue referendum, a majority also voted to grant more rights to same-sex couples.