The principles of taxation explained

The principles of taxation regulated in Art. 127 of the Federal Constitution constitute minimum standards that the legislator or regulator must observe. In addition to the design of taxes, the principles of levying taxes and the prohibition of inter-cantonal double taxation are also stipulated.

In Art. 127 of the Federal Constitution, the principles of taxation are written. The principles stated there form the basis for federal and cantonal tax laws. They must be respected in all cases.

Design of Taxes

According to Art. 127 Para. 1 of the Federal Constitution, the design of taxes, specifically the circle of taxpayers, the object of taxation, and its assessment must be regulated in the essential outlines in the law itself. These minimum requirements must be recorded in a formal law, i.e., a law subject to referendum. This first paragraph serves legal certainty, as one can easily lose track in the thicket of tax regulations. This principle applies to the Confederation and the cantons. In the case "Christian Science Society" (Federal Court Decision 103 Ia 242), the Federal Court also decided that the guiding principle applies not only to the tax obligation itself but also to any exceptions.

Tax Collection Principles

In Art. 127 Para. 2 of the Federal Constitution, the so-called tax collection principles are stipulated. These include the principles of universality and equality of taxation, as well as the principle of taxation according to economic ability. They are intended to protect taxpayers from excessive government interventions. The principle of universality of taxation arises from the need for equal treatment and states that everyone should pay taxes, regardless of personal characteristics such as ancestry or religious affiliation. With the principle of uniformity of taxation, a distribution of the government burden according to the same measure is to be ensured. From this principle results the progressive structuring of the tax burden. The principle of taxation according to economic performance demands that taxpayers contribute to the state budget in proportion to their means. It focuses on the ability of citizens to participate in tax burdens.

Prohibition of Inter-Cantonal Double Taxation

In Art. 127 Para. 3 of the Federal Constitution, the prohibition of inter-cantonal double taxation is stipulated. This means that the same person may not be taxed on the same part of wealth in two cantons with the same tax. Because the Confederation has not fulfilled its obligation to enact appropriate measures, the Federal Court has taken on this task. In a long-standing practice, it has specified guidelines that should prevent inter-cantonal double taxation. Although the Tax Harmonization Law also contains norms that facilitate the delineation of cantonal tax law, the primary purpose of the law is the standardization of cantonal legal rates.

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