Just interviewed Peter Hongler, professor of tax law at the University of St. Gallen, and finally got straight to the source: why is the Swiss system so strong, and why don’t other countries do the same? His answer is competition: cantons and municipalities compete on tax, which puts permanent public pressure on spending, and that, in his view, is the whole reason the tax-to-GDP ratio (~27%) sits so far under the rest of Europe (OECD average 34%). His favourite example is the football pitch. The municipality wants a new training field, it costs five million, so taxes go up, and you vote on it. You see the direct link between what leaves your account and what shows up in your village. He calls that the single biggest advantage of the whole setup. But, obviously shouldn’t that lead to cantons that get outcompeted so violently, that you have huge asymmetry? He explains that the competition works because of fiscal equalisation: Zug, Schwyz, Zurich and Geneva pay roughly CHF 6 billion a year into a pot so every canton reaches at least 86.5% of the Swiss average. “You cannot have just winners,” as he put it. And the reason nobody copies the model is that you can’t: he argues the cultural differences are what give each canton and municipality it’s unique sovereignty – good luck transplanting that into France. However, not saying everything is perfect: an example he gave was he did a study on work incentives for the City of Zurich. Findings were, that for families with children the income tax turned out to be almost irrelevant, the actual value resided in childcare costs, because the subsidy system, in his words, doesn’t work. In case anyone’s curious, full convo here: https://www.youtube.com/watch?v=nIvsubZu_kk submitted by /u/WeBeBallin
Originally posted by u/WeBeBallin on r/Switzerland