Swiss cantons have very different tax bases, tax rates and costs. Many think all taxes raised by each canton are spent there. This was true, however in 2008 it changed. A national financial equalization mechanism (or péréquation financière nationale in French) was introduced to reduce cantonal financial disparities. Now every year rich cantons pay and poor cantons receive.
This system looks at relative tax receipts as well as relative expenditure, acting as a kind of fiscal solidarity mechanism to temper the risk that cantons race each other to the bottom with tax rate reductions designed to attract wealthy new taxpayers. Under the new system those who aggressively compete on tax rates have to share some of their extra tax revenue with the other cantons, making it less worthwhile.
As one would expect some cantons like it while others do not. In a recent Vimentis survey those polled in four of the largest receiving cantons: Jura, Neuchatel, Valais and Fribourg were strongly in favour of the mechanism while two of the biggest contributors: Zug and Schwyz, gave it a thumbs-down.
In 2015, the top three payers are Zurich (CHF 417 million), Zug (CHF 317 million) and Geneva (CHF 256 million), while the top three recipients are Bern (CHF 1,233 million), Valais (CHF 560 million) and Fribourg (CHF 417 million). Vaud pays CHF 23 million making it, along with Basel-Landschaft and Schaffhausen, one of the three cantons closest to the middle.
The residents of the cantons of Uri, Jura and Glarus receive the highest amounts per capita of CHF 2,463, CHF 2,388 and CHF 1,892 per resident respectively, while the top per-capita payers are Zug (CHF 2,806), Schwyz (CHF 1,108) and Geneva (CHF 558). For Vaud residents it works out at a CHF 32 payment per head.
The system relies on complicated formulae that look at both the inward and outward sides of cantonal finances. For example the calculation requires Geneva to make a net contribution of CHF 256 million – Geneva pays CHF 363 million based on its revenue but gets to deduct CHF 107 million due to its “excessive” outgoings. Vaud is similar and is required to contribute CHF 23 million after offsetting its revenue-based contribution of CHF 91 million with an offsetting “excessive” outgoings deduction of CHF 68 million.
The calculation is done every year and the amounts paid vary over time. The amounts for 2015 are similar to those for 2014 in most cases, however Zug, Zurich and Schwyz all saw their net contributions shoot up by around 12% in 2015.
The graphic below from the Confederation’s website does a nice job of cutting through complexity to show from where and to where the payments flow.
Federal summary report (in English)
Federal detailed report (in French)
Very interessting article about the Swiss tax-money. Thank you for this. I will share it!