Same income but different taxes depending on where you live: “Tax differences aren’t fair, but they are necessary.”

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Tax differences in Switzerland are huge: a single household with a gross income of 100,000 francs has to pay the authorities only 5.84 percent in the cheapest municipality, Baar ZG, while in Enges NE the rate is 19.89 percent. That’s almost four times more! How do such big differences emerge? And why doesn’t everyone move to low-tax communities? Professor Kurt Schmidheiny (54) gives the answers in the interview. He researches tax competition and tax federalism at the University of Basel.

Blick: In some communities, people have to pay 3, 4, even 5 times that in taxes. Is it fair?
Kurt Schmidheiny: At first glance, it is absolutely unfair that you have to pay so many different taxes for the same income. However, there is no other way regarding the federalism and autonomy of the regions.

This is what you have to do…
In Switzerland, municipalities and cantons can decide whether they want to build a swimming pool or a new road, what type of school building they want, whether they want a university, how much they want to finance hospitals, and much more. The people decide what they want. This is very important for our democracy. Thanks to this local autonomy, surveys show that people in Switzerland are much less dissatisfied with politics than abroad. However, the downside to this is taxes. If you want something, you have to pay for it.

But tax competition also leads wealthy households to move to cheaper communities.
In fact, there is a concentration of high-income households in certain communities. This way you can avoid tax progression. Otherwise they would have to pay much more. Therefore, tax competition strengthens the divide between rich and poor. And thanks to the large number of wealthy residents, tax revenues in affordable communities are still higher than elsewhere. It cannot be said that these communities are more economical in terms of taxes. On the contrary. They have the most beautiful swimming pools and public schools. This further strengthens the differences in the long run.

The middle class, on the other hand, cannot benefit from these advantages due to the very high prices of real estate in tax havens.
In most cases, moving is only beneficial for rich people. There are also no millionaires living in communities with the highest taxes. Tax competition deprives them of good taxpayers. This is why Switzerland took action and did not allow unfettered competition.

So what do these interventions look like?
The rich cantons have to give a lot of money to the poor cantons through fiscal equalization. Without this, the differences in tax rates would be much larger. Then there is the direct federal tax, which is the same for everyone and where tax progression is very strong. Further compensation is provided through social insurance. Although unemployment is on average significantly lower in tax-favorable areas, they still have to pay the same amount here. I don’t think Switzerland would benefit if we eliminated tax competition.

Source :Blick