Geneva: the wealthy in the tax authorities’ sights

In Geneva, the Labour Party has launched a cantonal legislative initiative to increase the wealth tax on the wealthiest taxpayers. The proposal, entitled ‘For a contribution from multimillionaires’, aims to introduce an additional levy on very high net worth individuals and forms part of a sensitive political debate: how can public services be funded without increasing the burden on households and businesses?

For SMEs, the self-employed and their trustees, the issue is not merely an ideological battle over great wealth. In Geneva, taxable wealth may also include shareholdings in unlisted companies, property, cash, receivables or assets linked to an entrepreneur’s business activities. A change to wealth tax could therefore influence wealth planning, the personal cash flow of business leaders and, indirectly, certain business decisions.

A Geneva initiative targeting multimillionaires

According to reports by La Télé, which cites the Tribune de Genève, the PdT has launched a cantonal legislative initiative in Geneva aimed at increasing wealth tax. The text has been published in the Official Gazette and the initiators must collect 4,272 signatures by 1 March 2027.

The proposed mechanism involves an additional levy of 0.5 per cent on the portion of wealth exceeding 5 million francs, followed by a further additional levy of 0.5 per cent on the portion exceeding 20 million francs. The initiators estimate that the measure could generate 800 million francs for the state coffers.

The PdT defends its initiative as an alternative to austerity policies. In the explanatory memorandum quoted by La Télé, the party argues that it would be fairer for multimillionaires to contribute more to the funding of public services. The initiators also highlight the concentration of taxable wealth: in Geneva, millionaires with wealth exceeding 5 million francs are said to hold 68 per cent of the canton’s taxable wealth.

The political context is also acknowledged. The PdT refers to pressure on wages, rising rents and health insurance premiums, as well as cuts reportedly being planned by the State Council in several public sectors, notably state schools, hospitals, care homes, social services, LAMal subsidies and supplementary benefits. These factors form the framework of the initiative, but they will need to be debated as part of the cantonal political process.

Why the wealth tax also affects entrepreneurs

Wealth tax is a tax levied on an individual’s net assets. In practice, the value of the assets and rights held by the taxpayer is assessed, and then eligible debts are taken into account. For an employee without significant assets, the issue may remain abstract. For a business owner, it can become very real.

An entrepreneur may be taxed on assets that are not immediately available as cash. This is often the case when a significant proportion of their wealth consists of shares or equity interests in a family-run SME, a business property held privately, or receivables from their company. The tax value of an unlisted shareholding does not necessarily translate into an equivalent amount of liquidity in the director’s personal bank account.

This is one of the points that should not be underestimated in any discussion of wealth: a tax increase can create a need for liquidity for the owner, even when the wealth is tied up in the business itself. In an SME, this need may affect dividend policy, advances, the director’s remuneration or the decision to sell certain assets. These trade-offs must comply with the applicable tax, accounting and commercial rules, and be carefully documented.

The trust company acts as an intermediary here. It does not merely calculate tax; it helps to link the director’s personal tax situation to the economic reality of the business. A higher personal tax burden can influence how the owner remunerates themselves, how they finance an investment, or even their succession strategy. The challenge is to maintain a consolidated view, without mixing private and business assets.

Valuation of unlisted companies: the crux of the matter

In the case of an owner-director, the key issue often becomes the valuation of the business. A listed company has a visible market price. An unlisted SME, however, must be valued using methods recognised and accepted by the tax authorities. This valuation may take into account the substance of the business, its profit-generating capacity and other relevant factors, as appropriate.

For a trust company, recent events in Geneva serve as a reminder of the importance of a robust tax file. Annual accounts, dividend decisions, reserves, shareholder loans, property holdings, any restructuring and intra-group contracts can all factor into the analysis. An approximate or poorly documented valuation can lead to costly disputes with the tax authorities, particularly when the sums involved are substantial.

Managers dealing with substantial wealth should therefore avoid knee-jerk reactions. Transferring assets, altering the ownership structure or rushing through a distribution without a comprehensive analysis can lead to unintended tax consequences. A cantonal measure targeting wealth must be examined alongside other taxes and charges: income tax, tax on dividends, any property tax, capital gains tax, social security contributions depending on the nature of the remuneration, and inheritance tax implications.

It is also important to distinguish between two timeframes. On the one hand, the initiative is still only at the stage of collecting signatures. On the other, some entrepreneurs already have a vested interest in having a clear overview of their tax assets, regardless of the political outcome of the proposal. Waiting until the last minute to collate asset values, debts, supporting documents and cash flows between personal and business accounts complicates planning.

Private cash flow, dividends and SME governance

For an SME, the owner’s wealth tax does not appear directly in the company’s profit and loss account. It is a private tax. However, this legal separation does not mean there is no economic impact. If a shareholder-director has to cover a higher tax bill, they may be tempted to increase their remuneration or dividends. These choices have different consequences.

A higher salary affects the company’s social security contributions and cost structure. A dividend, in particular, requires the company to have distributable profits and for the decision to comply with the applicable rules. Excessive withdrawals can weaken cash flow, reduce investment capacity or limit the safety margin in the event of an economic slowdown. Conversely, retaining too much cash within the company may also affect its valuation and the owner’s taxable wealth, depending on the circumstances.

The right approach is to link distribution decisions to a cash flow budget. A trust company can help forecast both personal and business cash flows: taxes, advance tax payments, remuneration, potential dividends, loan repayments, planned investments, working capital requirements and contingency reserves. This exercise is particularly useful in family businesses, where the personal needs of several shareholders may differ.

Governance then becomes a highly practical tax issue. A shareholders’ agreement, a loan agreement, a dividend policy or succession planning are not merely legal documents: they also determine the ability to finance tax liabilities without putting operational activities under strain. However, each case must be analysed individually, as the implications depend on the ownership structure, the canton of domicile, the assets held and the family circumstances.

A political signal to be considered without haste

At this stage, the PdT’s initiative primarily marks the start of a political process. It must still pass the signature-collection stage, then follow the institutional procedure applicable to a cantonal initiative. The final parameters may evolve as the debate progresses. For taxpayers and businesses, it would therefore be premature to make significant financial decisions based solely on the launch of the initiative.

However, the initiative serves as a useful reminder: wealth taxation remains a key consideration in the planning of entrepreneurs based in Geneva. Executives with significant assets should ensure consistency between their tax returns, the valuation of their shareholdings, their remuneration policy and their succession strategy. Self-employed individuals, for their part, must also clearly distinguish between assets relating to their professional activity, their private assets and the debts associated with each of these categories.

For fiduciaries, the right course of action is not to announce a definite change, but to prepare the relevant files. This means identifying clients who may be affected, checking the quality of valuations, anticipating liquidity needs and explaining possible scenarios with caution. A tax initiative may fail, be amended or come to fruition in a different form. But it already reveals areas of vulnerability: illiquid assets, insufficient documentation, excessive reliance on dividends or a lack of estate planning.

The debate in Geneva on multimillionaires therefore goes beyond the mere question of the tax rate. It serves as a reminder that, for an entrepreneur, wealth is often tied to the business itself. Striking a balance between public funding, tax attractiveness and the continuity of SMEs will be a political challenge. For business leaders, the safest course of action for the time being remains a technical one: ensuring they have reliable figures, a clear structure and professional guidance before making any decisions.