Switzerland is considering changing the policies governing its commodities business—one that is currently worth $21 billion per year—as it works to comply with global standards that will keep it from being listed as a tax haven. Such changes could threaten its reputation as a global commodities trading hub.
Bloomberg reported Tuesday that even as new policies are being considered, commodities traders are being wooed by such countries as Singapore and Dubai. The secrecy that was formerly a hallmark of Swiss banking also extends to commodities trading, and Switzerland is afraid that its reputation could be destroyed amid inquiries on illegal activities such as tax evasion, bribery, human rights abuses and environmental damage.
In May the Swiss government launched an investigation into the commodities industry, and said that the country was “exposed to risks to its reputation” through its oil, grain and coffee trading activities.
Although commodity trading, centered mostly in Geneva and Zug, has given a tenfold lift to the Swiss economy in the past ten years, according to Zurich’s KOF research institute, its risks are also rising as the European Union (EU) increases the pressure on Switzerland to move away from a so-called auxiliary regime that has drawn in multinational commodity traders with the promise of lower taxes.
Trading brings in some 20 billion francs ($21 billion), or 3.5% of GDP, according to the State Secretariat for Economic Affairs. But Carlo Sommaruga, a lawmaker for the Social Democratic party, the second-biggest in the Swiss lower house, has said that the costs outweigh the benefits.