Low Tax, High Life

By Helena Bachmann/Zug

Marc Rich, the fugitive U.S. tax cheater famously pardoned by President Clinton earlier this year, has been back in the news--staging a boardroom coup to seize control of one of Switzerland's biggest property-management companies. This corporate drama brought another wave of unwanted attention to Zug, the picturesque and very private town where Rich works. But Zug has a lot more to offer than a chance to spot the elusive financier. Otherwise, why would 19,456 companies and subsidiaries locate offices there?

That's right: there's a company for every five residents in quaint little Zug and the compact canton that surrounds it. These companies' executives are no doubt impressed by the same attractions that lure tourists in summer and winter alike: the town's spectacular lakeside setting with the Alps towering in the distance. But there are also good business reasons to set up shop in Zug. It offers some of the lowest tax rates available in any stable democracy. And its laws protecting residents' financial privacy are among the strictest on the planet.

After centuries of living in photogenic poverty, the people of Zug decided in 1946 to turn their canton into a haven that would attract companies even from other parts of Switzerland. Today the 97,800 residents of the Zug canton, many of whom work in the corporate offices here, enjoy an average annual income of $40,000. Among them are at least six billionaires. Unemployment is virtually nil.

The maximum tax on corporate profits in Zug is 17.8%, as compared with 25% elsewhere in Switzerland, 18% in Liechtenstein and 39% in the U.S. "We offer not only fiscal conditions that are attractive to these companies but also an efficient, business-friendly infrastructure," says Franziska Holzgang, head of Zug's Economic Promotion Board. A company can be launched in Zug with little capital, registration fees are low, and the whole process can be completed within five days. The big banks and international airport of Zurich are only 14 miles to the north. And the work force in Zug is well educated and multilingual: its members hail from 96 countries.

Most of the corporations located in Zug engage in extensive trade and currency transactions in the commodities, financial and pharmaceutical sectors. Many are subsidiaries of firms headquartered elsewhere, including such big U.S. names as Abbott Laboratories, American Home Products, Bristol-Myers Squibb, Kellogg and PerkinElmer. These firms, and others from around the world, have no trouble getting executives to transfer to Zug, or to visit. The town offers both "tax advantages and a great quality of life," says Andreas Emmenegger, CFO of Fantastic, a software company with offices in Framingham, Mass., New York City, San Francisco, Atlanta and Dallas.

In winter there is skiing an hour's drive away at Unteragerei or Zugerberg. In summer the mountains are carpeted in wildflowers. The lake offers excellent sailing and is surrounded by highly ranked golf courses. Just half an hour away are the world-class opera, symphony and shopping of Zurich and Lucerne.

Fantastic's offices in the commercial district are a stone's throw from the old town center, a cluster of medieval buildings overlooking the lake and snowy peaks of the Rigi and Pilatus mountains. Winding pedestrian streets beckon with restaurants and tea rooms, where the local specialty is Zuger Kirschtorte, a sponge cake soaked in cherry liqueur and sprinkled with powdered sugar. You can try it at the Confiserie Speck--which is also a place where you might just spot Marc Rich.

TIME.com ON AOL For more about Zug--and the latest on Marc Rich--see our website at time.com/global