Where the tax havens and tax hells for companies are located
As KPMG's "Swiss Tax Report 2018" shows, profit tax rates for companies and income tax rates for individuals have stagnated in most places. However, various reform efforts in Switzerland and abroad are likely to make tax competition much more dynamic in the near future, according to the report.
KPMG's "Swiss Tax Report 2018" compares the profit and income tax rates of 130 countries and all 26 cantons. According to the auditing and consulting firm, there were no significant shifts in the Swiss tax landscape. Since the beginning of the observation period in 2007, the average ordinary profit tax rate of the Swiss cantons has decreased by only 3.05 percentage points. The picture is similar for individual taxation: After a moderate downward trend until 2012, the average of the top income tax rates has settled just below the 34% mark (see below).
Central Swiss cantons show themselves to be "tax havens" when it comes to profit taxes
On average, corporate income taxes in Switzerland were only marginally reduced compared with last year. In the ranking of ordinary profit taxation, the cantons of central Switzerland continue to have the lowest tax rates. While the vast majority of Swiss cantons made no changes compared with the previous year, Zug, Schwyz and Schaffhausen reduced their tax rates moderately. In the lower ranks, which are shared by western Switzerland, the Mittelland and the urban cantons, there were also only insignificant changes in the cantons of Jura, Ticino and Solothurn. However, in view of the upcoming Tax Bill 17, further, in some cases significant, reductions in ordinary profit tax rates are to be expected - especially in previous high-tax cantons.
The long-term trend shows stagnating profit tax rates overall. Only the cantons of Graubünden (-12.94 percentage points), Schaffhausen (-7.09), Lucerne (-6.58), Neuchâtel (-6.57) and Appenzell Ausserrhoden (-5) have reduced their rates significantly. In practice, the 12% mark has effectively established itself as the lower limit - the cantons are unlikely to be able to afford lower ordinary rates for corporate income taxes.
Ireland remains Europe's toughest location competitor
In a European comparison, there were hardly any changes in the top group of locations with very low tax rates. The cantons of central Switzerland were also very well positioned in this segment in 2017. Only the Channel Islands (0%) and some (southern) eastern European countries apply even lower ordinary profit tax rates. The largest location competitor in Europe remains Ireland with a profit tax rate of 12.5%.
Various northern, western and southern European countries bring up the rear in terms of tax attractiveness. Norway (-1 percentage point) and Luxembourg (-1.07) have again reduced their rates for 2018. France is even planning a gradual reduction in ordinary profit taxation to 25% by 2022. Germany, on the other hand, increased its tax rate slightly by +0.21 percentage points.
Although the USA has significantly reduced its federal tax rate, it has only moved into the middle of the field. In an international comparison, the real tax havens are still various offshore domiciles as well as Hong Kong and Singapore. Switzerland continues to rank in the top third in a global fiscal comparison.
"Tax hells" and "tax havens" for individuals: Two-tier Switzerland
In terms of individual taxation, the cantons of central Switzerland also occupy the top positions in an intercantonal comparison. Lucerne was the only canton to increase its tax rate marginally by 0.01 percentage points compared to last year. The red lantern for individual taxation is once again shared by the cantons of western Switzerland and the Mittelland. There were no changes compared to last year.
After a gentle downward trend, the average top income tax rate has settled just below the 34% mark over the past ten-plus years. The cantons of central Switzerland and Appenzell Ausserrhoden have topped the rankings virtually without interruption since 2007. Overall, the cantons have only made minor tax rate reductions for individuals. With the exception of the canton of Uri, which has reduced the income tax rate from 33% in 2007 to 25,35% in the meantime (2018).
There has also been little movement since 2007 in the high-tax cantons, which show little variance in rates. Exceptions are Aargau and the cantons of Solothurn and Jura, which have made significant tax rate reductions over the long term. Individual taxation has remained unchanged for more than ten years in the cantons of Neuchâtel, Bern, Vaud and Geneva.
Source: Swiss Tax Report by KPMG
