With a value added of nearly CHF 62.8 billion or 11.6% of gross domestic product (GDP), the financial sector was among the key business sectors in Switzerland again in 2008. The banking sector contributed CHF 41.3 billion to the real value added, which corresponds to 7.6% of GDP. The insurance industry contributed CHF 21.5 billion or 4% of GDP. The value added of the banking sector is in turn broken down into the business segments of retail banking, wealth management, asset management and investment banking.

The key importance of the financial sector to Switzerland as a business location becomes even more apparent when taking into account also the direct and indirect contributions of other business sectors. This includes services provided by non-financial businesses to the financial sector as well as other indirect beneficial effects. To quote but two examples: a construction company building a bank’s offices, or a foreign private banking client who combines his visit to the bank with a holiday in Switzerland. Financial firms also promote the growth of other businesses, for instance by granting loans for building or expanding production facilities or by providing business disruption cover. Even by international comparison, the financial sector ranks high in Switzerland. Its contribution to the total value added is twice to three times larger than in any other European country except Luxembourg.

In 2008, around 196,400 people or 5.9% of the Swiss working population were employed in the overall financial sector, of which 4.1% in the banking sector and 1.8% in the insurance sector. Almost 40% of bank employees work for big banks. Nearly three-quarters of all insurance employees work in property and casualty, followed by life and reinsurance. Productivity in the financial sector (value added divided by number of employees) is clearly superior compared to the average productivity in other important sectors. The 5.9% of the working population employed in the financial sector account for 11.6% of the overall gross economic output. In other terms, the productivity per financial sector employee is almost twice the overall average.

Banks are among the major taxpayers in Switzerland, even though there is no standard method of attributing specific tax categories to the banking sector. The tax contribution of the banking sector may be structured in these four categories:

• Taxes paid directly by the banks, including primarily the tax on capital and income generated in Switzerland, as well as part of the issue tax and the portion of value added tax (VAT), which banks pay but cannot deduct as prepaid tax due to limited taxation of financial services (“taxe occulte” or hidden tax on VAT-exempt bank services).
• Taxes paid through the banks’ production factors. This category includes the bank employees’ personal income taxes on salaries and bonuses, as well as income tax paid by Swiss tax residents on dividends from banks.
• Taxes paid by clients on financial transactions processed by banks in Switzerland. This category includes in particular part of the “residue” of withholding tax (the part that Swiss tax residents do not reclaim, and the withholding tax from non-Swiss tax residents) as well as a part of the stamp duty. It also includes the 25% of retained tax for the EU (taxation of savings income) that remains in Switzerland, as well as the VAT on financial services.
• Taxes related to financial transactions without the involvement of banks (e.g. stamp duty paid by securities dealers outside the banking sector).

In conclusion, over the past four years, banks contributed on average more than CHF 13 billion per annum to the public revenues, either directly through the taxable incomes paid to their employees and the taxable profit distributions, or indirectly through stamp duty and withholding tax most of which were generated by banks. Direct foreign investments are investments made by Swiss companies outside Switzerland with the purpose of establishing a strategic long-term relationship with the company in which they invest, and ensuring a significant influence on the company’s management. According to the OECD definition, a long-term interest is given if the direct investor holds at least 10% of voting rights in the direct investee. Direct foreign investment subsumes a variety of transactions such as opening non-independent branch offices, entering into joint ventures, establishing subsidiaries, or mergers and acquisitions. Loans to foreign subsidiaries within the group and profit retention by foreign subsidiaries are also deemed direct investments. A distinction is made between annual direct investments (periodic value) and the existing portfolio of direct investments (cumulative value). The latter represents the accumulated annual inflows and outflows, and reflects market volatility and currency fluctuations.

By international comparison, Swiss direct investment abroad is quite substantial. This is also reflected in the ratio of the cumulative Swiss direct investment abroad to the nominal GDP, which was 149% at the end of 2008. Banks and insurance companies account for roughly one-quarter of these direct investments.

Vice-versa, foreign direct investments in Switzerland are equally important to the Swiss financial sector. The capital held by foreign direct investors in the Swiss banking and insurance sector amounted to about CHF 59.2 billion. Furthermore, a substantial number of shareholders in large Swiss financial companies are non-Swiss.