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Switzerland: How Long One Works for the Taxman

How long do the Swiss work to pay their taxes? The answer varies considerably, depending on the person's place of residence, family status and income level.

Persons engaged in gainful employment in Switzerland work not only for their own financial enrichment; a certain amount of their annual wage income flows to the state via taxes and social security charges. The tax amount owed varies considerably, depending on the person's place of residence, family status and income level. Our TAX-I (TAX Independence Day) calendar depicts these differences in a way that is easy to grasp. The TAX-I date denotes the day of the year by which a taxpayer has earned enough money to pay off his or her tax bill. The TAX-I calendar applies the assumption that each taxpayer is gainfully employed from January 1 onward and exclusively uses his or her earned income to first pay off his or her tax bill.

Zug Is the Longstanding Leader

Zug continues to be the most attractive canton in Switzerland from a tax perspective, as it was in 2013 and 2011. Dual-income married couples, families with children and recent graduates (see "Methodology" info box) all reach the TAX-I date in Canton Zug earlier than in any other canton. Canton Schwyz occupies second place for all types of households.

Higher Tax Burden in Western Switzerland

Canton Neuchâtel exhibits the highest tax burden. There a household has to work more than twice as long as the same type of household in Canton Zug to pay off its tax bill. The figure "Swiss Municipal Tax Burdens" shows the effective tax burden for dual-income married couples by municipality. The annual tax burden ranges from CHF 18,000 in Wollerau in Canton Schwyz to just over CHF 40,000 in Les Verrières in Canton Neuchâtel. Cantons in western Switzerland exhibit a much higher tax burden than large swaths of central and eastern Switzerland; Canton Valais ranks in the middle of the pack. The differences are particularly pronounced for dual-income married couples shown in the graphic below, and the variation is greater than for families with children and for recent graduates.

Tax Deductions and Tax-Rate Progression: Striking Differences

On average, families with children reach the TAX-I date on March 5, single recent graduates on March 14 and dual-income married couples on March 18. A look at the individual model households reveals significant differences in the rankings of the cantons. The allowed tax deductions and tax-rate progression of the respective cantonal tax systems make some cantons much more attractive for low-income households with children than for households with high gross incomes, as is the case in Canton Valais, for example (see figure: "TAX-I for model households and cantons"). The high deductions for dependent children and the steep tax-rate progressions push the curves far apart from each other. The cantons of Geneva, Ticino, Graubünden, St. Gallen and Zurich are likewise generous to families. The cantons of Lucerne and Obwalden stand out for the fact that dual-income married couples and single recent graduates reach the TAX-I date there almost at the same time. This is because Lucerne and Obwalden have barely progressive tax systems that hardly create tax drawbacks for married couples compared to unmarried cohabiting couples.

Bern Drops Four Spots

The cantons' rankings haven't changed much compared to 2013. The only major change has been in Canton Bern, where the 2014 TAX-I date for dual-income married couples was six days later than in the prior year due to the canton's repeal of the universal flat deduction for job-related expenses. This caused Canton Bern to drop four spots in the rankings. Other tax increases affected the cantons of Appenzell Ausserrhoden and Glarus, which both reached the TAX-I date one day later than in 2013.

Tax Competition Has Lost Momentum

The findings clearly spell out the trend observed in recent years. Tax competition with regard to natural persons has lost a lot of momentum. The less comfortable financial situation now facing the cantons and costly reform projects such as the new hospital financing regime and the draft Corporate Tax Reform III legislation leave little leeway for cutting taxes for private individuals.