Locational Quality: Basel-Stadt Set to Overtake Canton Zurich
This year's Locational Quality Indicator of Credit Suisse once again places the cantons of Zug and Zurich at the top of the rankings. The Corporate Tax Reform III will however shake up cantonal rankings in the future: Basel-Stadt is set to overtake Zurich, with Geneva likely to make the greatest leap in the rankings.
Intense competition between different locations is forcing the Swiss cantons and regions to take steps to optimize their appeal to the greatest extent possible. The annual Locational Quality Indicator (LQI) of Credit Suisse measures the attractiveness of the various Swiss cantons and regions to business. It looks at seven "hard" location factors and provides companies with a basis for evaluating locations. In addition, it can be used as a benchmarking tool for enhancing cantonal and regional location policy.
Zug and Zurich Top the Rankings Once Again in 2016
Zug exhibits the highest locational quality by some margin, followed by Zurich. Next comes a group of five high-ranking cantons: Aargau, Basel-Stadt, Nidwalden, Lucerne and Schwyz. A series of suburban cantons plus the city canton of Geneva account for the middle rankings. Rural and mountainous cantons come in below the national average. Their natural parameters – such as topography and distance to larger economic centers – are largely immutable and make location policy difficult. Positioning can be influenced, however, as illustrated by the example of the Canton of Uri, which is significantly better placed than other mountain cantons. Also, the metropolitan cantons of Bern and Vaud come in below the Swiss average.
Regional View: Significant Differences within the Cantons
For the larger, heterogeneous cantons – such as Bern, Vaud, Ticino and Graubünden – an analysis merely at cantonal level is too superficial. For this reason we also investigate locational quality at the level of 110 economic regions. The greatest appeal is exhibited by the urban centers of Zurich, Zug, Baden, Lucerne, Basel and Bern, as well as their wider agglomerations, thanks mainly to their easy accessibility. In Suisse Romande, Nyon is positioned well above neighboring regions, while in Ticino the same is true for Mendrisio und Lugano. Alpine areas and the regions of the Jura arc are clearly less attractive to companies, due to their topographical features and, in some cases, the length of travel time to urban centers.
CTR III: Basel-Stadt, Vaud and Geneva to Cut Corporate Taxes Significantly
Several factors of locational quality will change significantly in the years ahead. On the one hand, the Corporate Tax Reform III is set to have a fundamental impact on business taxation. In addition, the completion of the NEAT rail link through the Alps as of 2020 will boost the accessibility of central and southern Switzerland. On the basis of the profit tax cuts announced by the cantons so far and changes in transport accessibility, we have come up with a forward-looking Locational Quality Indicator for 2020.
Locational Quality 2020: Basel-Stadt Set to Overtake Canton Zurich
As announced today, the Canton of Basel-Stadt is planning to reduce its corporate profit tax rate to 13 percent. In addition, it is planning to reduce its relatively high current capital tax rate of 0.525 percent to just 0.1 percent. This would offset the disadvantage Basel-Stadt has at the moment with its high ordinary tax rates, propelling it to second place in the Locational Quality Indicator, ahead of Zurich. The greatest leap in the rankings is set to be made by the cantons of Geneva and Vaud, which are likewise looking to improve their appeal from a tax perspective. In the LQI of Credit Suisse for 2020, Geneva advances to 4th place (+9) and Vaud to 11th place (+6). By comparison, the improvements in public transport accessibility as a result of the opening of Gotthard and Monte Ceneri base tunnels have only a slight impact on the LQI.