Nestling beside a lake overlooked by snow-dusted mountains, Zug seems for all the world like just another cute, affluent Swiss town.
You could wander its cobbled Altstadt, sample its culinary specialty, a liqueur-drenched Kirschtorte, and even stay on to see one of Zug’s renowned sunsets without ever imagining you were at a cardinal point of the global economy — or in a town that, for years, was the hideout of the world’s most wanted white-collar criminal.
According to the government of the canton of which Zug is the capital, there are 27,000 companies on its commercial register — one for every man, woman and child in the town, leaving a few hundred to spare. A Zug-registered firm is building the strategically critical gas pipeline that will link Europe with Russia via the Baltic. Another is the luxury goods group that owns the Cartier, Piaget and Vacheron Constantin brands.
About 3 percent of the world’s gasoline is traded, either as crude oil or refined product, through Zug and the neighboring town of Baar. Few of the world’s cars, clocks or computers would work without the metals that are bought and sold here.
Yet the signs of wealth in Zug are remarkably discreet: no casino, no stretch limos, no exclusive nightclubs. They are there, the signs, but you have to look hard for them.
How many provincial newsagents, for example, have an ample stock of the Forbes Investment Guide, which is aimed at the unabashedly rich? How many medium-sized towns could afford an exhibition like the one that is currently showing at the Kunsthaus in Zug, with works by Kandinsky, Mondrian and Eliasson?
A glance into a real estate agent’s window will show you that a modest three-bedroom dwelling with a view of the Zugersee lake is going to set you back around US$2 million. The evidence of commercial activity, too, is negligible. There are very few office blocks as such. Most of the commercial premises are located in three or four-story buildings over shops or restaurants.
They usually have an entrance at ground level with an array of postboxes on which the words that crop up most often are Stiftung (foundation), Treuhand (trust) and, above all, Beratung (consultancy). The consultancies in particular often provide convenience addresses for firms whose real business lies thousands of kilometers away.
Zug could easily have remained the market town it was until after World War II, making a modest living from livestock and the fruit orchards that stretch up the foothills of the Zugerberg mountain. But in 1946 the cantonal government decided it should have one of the world’s lowest tax regimes.
Holding and investment companies that do not do business in Switzerland pay corporation tax of only 8.5 percent on their profits. Taxpayers, as the local revenue service says, “are considered as clients, not debtors.”
Boris Becker, the former tennis star, is among those who have been won over by this enticingly unassuming approach. He decided to abandon his native Germany after being put on trial for tax evasion. Convicted and fined in 2002, he now lives in a penthouse overlooking the Zugersee.
A relaxed attitude to revenue also proved irresistible to Marc Rich, the Belgian-born commodities trader who in effect invented the spot market for crude oil. It helped him create one of the world’s biggest privately owned firms and amass a personal fortune recently estimated at more than US$1.5 billion.
In addition, Zug offered Rich a much-needed bolthole after 1983. That was when he was put on the FBI’s 10 Most Wanted list following his indictment for trading with Iran during the 1979-1981 hostage crisis and evading almost US$50 million in taxes. In 2001, Rich was controversially pardoned by former US president Bill Clinton in the dying hours of his presidency.
There is still a Marc Rich group in Zug. It operates from top-floor offices above a shopping center near the station. But the trading empire he founded, which he left in 1994, is today known as Glencore. Its headquarters is in a complex of dazzlingly white buildings on an industrial estate 3km outside Zug. And it is almost as secretive as when it was run by Rich.
Among its many other interests, Glencore is the biggest shareholder in another famously reticent company, the acquisitive mining firm Xstrata, one of the top 100 companies in the UK. Xstrata, which has stakes in mines from Peru to Papua New Guinea, is also registered in Zug.
The presence of Glencore and other commodity trading enterprises helps explain why the Confiserie Meier bakes its own scones and sells lemon curd. And why the Mr Pickwick pub serves draught Tetley’s and London Pride.
“A lot of the traders are from Britain,” a barman said. “They get a good wage and when they come out here it’s like starting a new life for them. They get a new car. They get a new apartment. They fit it out with a fantastic sound system. Maybe they get a boat on the lake. It’s a playground, really.”
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