Income tax burden in the Canton of Zurich is below the national average

The annual "Zurich Tax Burden Monitor" shows that the income tax burden in the Canton of Zurich is below average thanks to taxation that is friendly to the middle class. The taxation of legal entities tells a different story. In the inter-cantonal comparison of net profit and capital taxation of corporations, Zurich ranks among the last places.

Since 2008, BAK Economics AG has been annually preparing a report on the tax position of the Canton of Zurich in the inter-cantonal comparison on behalf of the Finance Directorate of the Canton of Zurich: the "Zurich Tax Burden Monitor". In addition to the income and wealth tax burden of natural persons, the report also examines the taxation of legal entities to a limited extent.

Below Average Income Tax Burden

The "Total Income Tax Burden Index" issued as part of the Zurich Tax Burden Monitor is based on the tax burden figures from the Federal Tax Administration (FTA) and shows how heavily the income of natural persons is taxed on average in the individual cantons. According to the report, the Canton of Zurich consistently ranks 9th in the inter-cantonal comparison of the 2019 tax burden with an index value of 88.4 against a national average of 100. The reason for this good positioning is the middle-class-friendly taxation of the canton. Residents of Zurich with a gross income of CHF 60,000 to CHF 200,000 benefit from a below-average tax burden in the national comparison. While the middle class pays comparatively little, very high and very low incomes are taxed relatively heavily in the Canton of Zurich. The country's lowest average tax burden is in the Canton of Zug, followed by the Cantons of Schwyz and Grisons. The Canton of Bern is at the bottom of the ranking.

No Change in Wealth Tax Burden

The Canton of Zurich also ranks 9th for the 2019 wealth tax burden. Although there were no significant changes in taxation in Zurich, the canton lost one rank compared to the previous year. This ranking loss is due to a tax reduction in the Canton of Appenzell Innerrhoden. In the inter-cantonal comparison of wealth tax burden, the Canton of Schwyz performs best. By contrast, the residents of the Canton of Valais pay the most.

High Tax Burden for Legal Entities

In the comparison of net profit and capital burden of joint-stock companies (before taxes, with capital and reserves of 2 million francs and a return of 20 percent) in the canton capitals, Zurich ranks 24th. Only in Delémont (JU) Jura and Geneva (GE) are companies taxed even more heavily. Unlike with natural persons, tax competition for financially strong companies is generally not just a cantonal phenomenon but occurs on an international level. It is therefore worth looking beyond national borders. A comparison of corporate tax burdens with selected economic metropolises shows that Zurich, like all Swiss cities, has a relatively low tax burden in the international comparison. The average tax burden of a profitable investment in Zurich is between 15 and 20 percent. While Hong Kong ranks at the top of the comparison with a burden of about 10 percent, Paris with over 30 percent is at the bottom of the ranking.

Source: BAK Economics AG: Zurich Tax Burden Monitor 2020.

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