Tax reform strengthens Switzerland as a business location

With the implementation of the tax reform and AHV financing (STAF), Switzerland has become more attractive around the world as a tax location. This is shown by an analysis conducted by BAK Economics. The canton of Nidwalden is therefore now likely to become the most favorable tax location in the world.

Many cantons are sharply reducing standard rates of corporate tax. Generic Image: Pixabay

Tax burdens represent an important metric in assessing the comparative international attractiveness of business locations. According to an analysis including long-term projection to 2025 carried out by the economic research institute BAK Economics AG (BAK) for the BAK Taxation Index 2020, the Swiss taxation landscape is set to change significantly for the good of the country’s economy.

Many cantons are sharply reducing standard rates of corporate tax. This will therefore further increase the fiscal competitiveness of Switzerland in the international arena. Alongside the newly introduced taxation instruments aimed at boosting innovation, this provides security of planning to companies, according to BAK.

Major reduction in tax burdens across several cantons

A comparison of standard tax burdens reveals the impact of the reform. According to the projection for the phase after the STAF implementation in 2025, the weighted Swiss average for gross domestic product (GDP) across all 26 cantons would decrease from 16.8 percent before STAF to 13.5 percent following STAF taking effect.

At -8.7 percentage points, the most significant reduction in the standard tax burden can be seen in the canton of Basel-Stadt. Six cantons display reduced burdens of more than  -5 percentage points, with a total of 12 cantons cutting their rates by more than a single percentage point. In four cantons, the reduction in tax burden will total less than one percentage point. Just three cantons do not envisage any reduction in line with the current planning status.

Nidwalden set to become the world’s most favorable tax location

BAK undertook a comparison of standard tax burdens following full implementation of the reform with international values from 2019 as well. This revealed that the canton of Nidwalden is set to replace the current table-toppers, Hong Kong, provided that no reduction in rates of taxation is implemented here. Moreover, the Swiss average is likely to undercut the tax burden applicable to Singapore in the wake of the reform.

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