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Unformatted text preview: not only vary on ethical
grounds, but also depend on the mobility of individuals and business enterprises, that is: their capacity to avoid, through
voting-with-their-feet, the incidence of high redistributive taxation. Minimising these distortions calls for a substantial
degree of co-ordination and tax harmonisation, that is for a co-operative effort to secure a system of taxation that
minimises excess burden and yields a desirable pattern of incidence (WEINER and AULT, 1998).
In the Swiss situation, FREY (1981) and WEBER (1992) show that tax-induced migratory movements are small. Not only
the price-service ratio of public policies, but a number of other private determinants influence the choice of residence or
location. Legal entities know that they can obtain a tax break in almost any new location, even though this is neither
formally nor officially publicised. In addition, with initiative and referendum, the citizens have not only an "exit", but also a
"voice" solution. Since tax co-ordination has existed for many years, problems of tax harmonisation have been discussed
in terms of neutrality and in the context of reducing administrative and implementation costs, rather than from an equity
point of view. 5.1. Tax co-ordination
5.1.1. Vertical co-ordination Vertical co-ordination concerns the assignment of tax authority to the various levels of government. It should be clear
which jurisdiction is entitled to tax which items from which taxpayer. Attention must be given to the geographical
distribution of tax yield. A good tax under subcentral authorities should have a tax base that is widely and evenly
distributed throughout the country (KING, 1984, pp. 210-211). In addition, one can say the general objectives of vertical
iv. stable and predictable revenue sources at the three levels;
high proportion of own resources of total cantonal and communal revenue;
sufficient tax room at the cantonal and communal levels;
efficient decentralised taxation and accountability; Are fulfilled in the Swiss case:
Referring to table 7, one can see that in Switzerland vertical co-ordination is obtained
♦ partly through the attribution of exclusive tax sources to each level of government according to the doctrine of the
separation of sources. This is clear for consumption and expenditure taxes where there is no overlapping of the tax bases
between the Confederation, the Cantons and the communes. ♦ On the other hand, for "direct" taxation, personal income, corporate profits and capital are jointly taxed at the three levels.
The vertical apportionment between the three levels of government is rather complex and often left implicit. It is obtained in
two ways: a moderate taxation at each level so that no single government exhausts the entire tax capacity; and, the
assessment of priority, first to the Cantons, then to the communes and lastly to the Confederation. It has been traditionally
admitted for di...
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