Unformatted text preview: of the tax burden on less mobile factors or activities (i.e. labour and
consumption), a transfer which will impinge on both employment and fiscal equity.
Now, since in Switzerland each canton seems ready to discuss a fiscal agreement with those (newly established) firms
producing a relatively high-valued output, over the long run any economic benefit that might result in terms of regional
income or employment growth is bound to be nullified by the fiscal competition of other cantons. Whenever a canton’s
fiscal strategy is successful in attracting a firm by granting it a fiscal bonus, another canton will soon do the same by
reducing its tax burden on business profit and capital, and so on, until all cantonal fiscal burdens are eventually reduced
to a minimum owing to a lack of co-ordination between local governments. This self-reinforcing, downward process can
be illustrated with respect to the empirical evidence over the period 1985–99 for the seven French-speaking Swiss
cantons, with a numerical example assuming a business capital of 2 millions Swiss francs and a profit of 320,000 Swiss
francs (Table A).
TAXATION OF BUSINESS PROFIT IN FRENCH-SPEAKING
Canton 1985* 1995* 1999* 1985–99 Berne
51 710 ↓
51 681 ↓
59 149 ↓
58 721 ↓
59 607 ↓
63 342 ↑
58 723 ↓
58 549 ↓
88 897 ↓
88 565 ↓
65 325 ↓
65 204 ↓
64 091 ↓
63 976 ↓
* current value in SFr.
Sources: Administration fédérale des contributions, Charge fiscale en Suisse 1985, Bern: Statistical Series, 18, 1986, p. 67; Administration fédérale des
contributions, Charge fiscale en Suisse 1995, Bern: Statistical Series, 18, 1996, p. 69; Administration fédérale des contributions, Charge fiscale en Suisse 1999,
Bern: Statistical Series, 18, 2000, p. 69. The example in Table A includes cantonal, communal and church taxation in current value. It shows that all Frenchspeaking cantons, except Geneva, have reduced their tax burden on business profits over the last 15 years. In
particular, the canton of Jura has the highest rate of decrease (32 per cent), owing to its awkward geographic position
and its relatively low cantonal income (both in absolute and per capita terms). As regional economic theory explains, in
fact, the localisation of firms depends on a number of factors other than fiscal advantages (which are actually annihilated
by fiscal competition between local governments). Among these other factors one may include the proximity of markets,
and easy (i.e. low-cost) access to motorway and railway networks, two factors which are still lacking the Jura canton.
79 Commission on Fiscal Imbalance Analogously, the canton of Valais probably suffers from its geographic situation and thus tries to attract (or retain) firms
via an important decrease in business taxation (13 per cent over the period 1985–99). Conversely, the canton of Berne
seems to have considerably reduced it...
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