WRITTEN QUESTION E-2233/99

by Christopher Huhne (ELDR) to the Commission

(1 December 1999)

Subject: Capital flows into Switzerland

Detail the gross and net capital inflows into Switzerland, the gross flows, where possible, by source and by type of instrument purchased (bank deposit, bond, etc.), over each of the last ten years. Has there been any noticeable change in flows as a result (a) of the Swiss debate, including the referendum, on the nature of its relationship with the EU and (b) of the Commission proposal for a withholding tax (in the savings directive)?

Answer given by Mr Solbes Mira on behalf of the Commission

(21 January 2000)

The Commission is sending direct to the Honourable Member and to Parliament's Secretariat the available statistics (International monetary fund (IMF) statistics, financial accounts), which show that there has been an increasing net outflow of capital from Switzerland over the period 1989 to 1998. This corresponds over the years broadly to an excess of domestic savings over domestic investments that was channelled abroad. Among the various types of flows, direct investments show a marked trend of increasing net outflows, whereas portfolio investments and short-term flows (Other flows in the statistics) exhibit large fluctuations around an only modestly increasing trend. The major peaks for portfolio investments are grouped in the two periods of 1993-1994 and 1996-1997, whereas short-term net outflows peaked in, respectively, 1990 and 1998. The movements observed, as well as the underlying gross flows, coincide rather well with periods of pronounced volatility on financial markets (for instance, the currency crises in Europe and the global bond crisis during 1992-1994; the increasing international presence of Swiss banks starting from 1995; the global financial crises of 1997-1998; and in addition market movements due to the advent of economic and monetary union). Possible results from the events mentioned by the Honourable Member seem apparent only in the case of direct investment.

Inward direct investments show a marked decline in 1992-1993, but have thereafter regained earlier levels. In contrast, outward direct investments started a period of pronounced increases after 1992, from having been relatively stable in the period before. These developments could perhaps to a certain extent be attributed to a change in confidence in the Swiss economy following the referendum.

Apart from the above, the year-to-year development of capital flows does not indicate any marked effects either from the referendum or from the current Community proposal for a proposal for a Council directive to ensure a minimum of effective taxation of savings income in the form of interest payments within the Community(1). The developments mentioned earlier, as well as more persistent trends, such as the globalisation of financial markets, all contributed to influence the capital flows and appear to dominate their variation. Still, a possible influence from Community efforts to harmonise capital income taxation could materialise eventually, once a new directive concerning capital income taxation is adopted and the public and the market can learn the precise content of the new legislation, implementation date and implications.

(1) OJ C 212, 8.7.1998.