USR III – Cantonal share will be increased

The Parliament has decided to increase the cantonal share of direct federal tax to 21.2%. Learn more about the background of the increase in our article.

Direct Federal Tax

According to Art 128 of the Swiss Federal Constitution, direct federal taxes can be levied on the income of natural persons and the profit of legal entities. Thus, the direct federal tax is based on the principle of ability to pay, which relies on an individual's net worth. The right to levy these taxes is always limited in time and currently extends until the end of 2020 (Art. 196 Clause 13 BV). The cantons are responsible for the assessment and collection.

Cantonal Share

Since 1 January, the cantons provide the Confederation with 83% of the tax revenues, fines, and interest they collect. Thus, 17% remains with the canton (known as the cantonal share). On Tuesday, June 15, 2016, in the last round of negotiations on Corporate Tax Reform III, it was decided to raise this share to 21.2%. The new regulation is intended to give the cantons room to reduce profit taxes in order to prevent the migration of those companies whose tax privileges are eliminated by the reform. The tax revenue losses at the cantonal level will thus be compensated by a shortfall at the federal level, which is estimated to be well over 1 billion francs. The tax revenue losses at the cantonal level are not yet reliably quantifiable.

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