Unformatted text preview: rect taxation that the federal share should not exceed one fourth of the total. Minimum taxable income at the
federal level should be higher than in the Cantons and the tax rate schedule more progressive. Yet, the Cantons receive
back 30 per cent of the federal direct tax (FDT) in the form of revenue sharing, of which 13 per cent is affected to intercantonal fiscal equalisation (see below section 6.2). ♦ Note also that Switzerland has a particular characteristic: the vertical tax co-ordination is written in its Constitution. Following
art. 196 Nr 13 of the transitory provisions of the 1999 Cst., the FDT may be levied until the end of 2006 only. The
consequence is that, some years before this limit, the federal government must justify the further necessity of levying a
direct tax at the central level in concurrence with the Cantons and the communes, and explain its motives. The decision to
continue to levy a FDT necessitates the double majority of voters and cantons, which is a powerful mean for the Cantons to
obtain compensatory advantages, notably in the equalisation policy.
With the enforcement of VAT on 1 January 1995, and with it, the extension of expenditure taxation to services, the most
orthodox federalists claim that the joint attribution of direct taxation to the Confederation and the Cantons should end. The
argument is that the overall burden of indirect (consumption) taxes is still lower in Switzerland than in most other European 15 It is significant that all initiatives for a nation-wide or canton-wide uniform system of taxation on income and wealth of individuals and on corporate
profits and capital have been rejected in popular votes because it would restrain the fiscal flexibility of lower levels of government and increase their
dependence on transfer payments. Differences in cantonal and communal tax burden are viewed as the price of autonomy (DAFFLON, 1986).
The federal direct tax on business capital has been suppressed by the law of October 10, 1997 from 1998 onwards. 16 76 16 Commission on Fiscal Imbalance countries. This gives a freedom of manœuvre which should be used to reduce the direct tax burden which, combined to
social security contributions, is higher that average. For some, there should be a crystal-clear order in taxation under the
slogan: "VAT. is federal / direct taxation is cantonal". Opponents argue that the abolition of the FDT will set back income
redistribution through ability-to-pay taxation because the tax rate progressiveness of the FDT is higher than in any canton.
In addition, the abolition would create difficulty in the federal → intercantonal equalisation policy.
♦ Vertical co-ordination between the Cantons and their communes is secured because, as explained in section 3.4.2., local
governments have no sovereignty on these matters, but only tax flexibility. The most debated question is whether local
governments can taper at this source in priority, to the detriment of the cantonal tiers. The usual s...
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