Swiss Canton Zug cuts its corporate taxes and returns on top of 2020’s Credit Suisse Locational Quality Indicator

Swiss Canton Zug cuts its corporate taxes and returns on top of 2020’s Credit Suisse Locational Quality Indicator

(PRESS RELEASE) ZURICH, 13-Oct-2020 — /EuropaWire/ — Credit Suisse, a global wealth manager, investment bank and financial services firm, has announced the release of its Locational Quality Indicator annual study for 2020 that looks into the locational quality of Swiss cantons and regions. According to the study Zug occupied the top spot in the cantonal rankings thanks to a recent cut in corporate taxes – though its lead over Canton Basel-Stadt is minimal. Canton Geneva moves up ten positions to fourth place, putting it just behind Zurich but some way ahead of Canton Aargau. Canton Fribourg is up five positions, and now ranks 18th.

The reduction in corporate income tax in Canton Zug, which took effect in early 2020, meant that Canton Basel-Stadt – which had already cut corporate income tax in early 2019 – lost its top spot in the cantonal rankings after just one year. The gap to Zug is nevertheless tiny (see Fig. 1). Some distance behind are Canton Zurich and now Canton Geneva, which moves up ten positions. These locations offer an attractive combination of factors. The Cantons of Aargau, Schwyz, and Nidwalden likewise boast results that are well above average. In the middle of the pack – which is led by Canton Lucerne – Basel-Land, Schaffhausen, and Solothurn each move up two positions. The second-biggest jump in the rankings – a whole five positions – is shown by Canton Fribourg, putting it closer to the mid-field. After years of stability, there is a change at the bottom end of the rankings: Among other factors, a slight improvement in the tax burden for legal entities enabled Canton Jura to push Canton Valais into bottom place in this year’s Locational Quality Indicator (LQI).

Other cantons have cut corporate taxes
Tax policy is a key element of locational trends, and the easiest LQI sub-indicator to influence. As was the case last year, the most important changes in the locational quality rankings were primarily down to changes in taxation for the corporate sector: Geneva and Fribourg – this year’s rising stars – significantly improved their tax appeal to legal entities. Following the reduction in corporate income tax rates that took effect in Canton Zug at the start of 2020, the canton from Central Switzerland now lies in top place not only in terms of the tax index for natural persons but also the tax burden for legal entities: The effective maximum rate for corporate income tax in the city of Zug is now 11.91% (vs. 14.35% in 2019). Zug is closely followed by the Cantons of Appenzell Innerrhoden, Nidwalden, and Obwalden; however, the tax cuts implemented by numerous other cantons mean that they too offer attractive corporate tax rates – and so the relative advantage of low corporate taxes has decreased. Further, smaller shifts in the locational quality rankings are likely to occur in the next few years due to the gradual adjustment of corporate taxation in many places.

Peripheral regions rely on commuters with a higher education
Manufacturing and commercial businesses are dependent on workers with professional training. In knowledge-intensive areas of the economy, highly qualified employees are the key factor of production. The availability of specialized and highly qualified people at a particular location is based not only on individuals residing in the respective region but also on inbound and cross-border commuters. The level of education among the Swiss labor force has increased significantly in recent decades, according to the economists at Credit Suisse; however, there is evidence of a town/country divide in terms of the availability of highly skilled workers. Over 40% of potential employees in urban regions and their immediate agglomerations, and as many as 57% in the city of Zurich, have a degree from a university, university of applied sciences, or higher vocational school. The proportion in rural areas is less than 25%. The analysis by the Credit Suisse economists shows that incoming commuters usually have a higher level of education than local residents. Thus, in large parts of Switzerland, the tertiary ratio for inbound commuters is over 10% higher than the figure for individuals residing there. In peripheral regions in particular, companies are reliant on commuters with a higher education.

Regional view: Significant differences within the cantons
For the larger, heterogeneous cantons – such as Bern, Vaud, Ticino, and Graubünden – an analysis solely at cantonal level is too superficial. Therefore, the Credit Suisse economists additionally analyzed locational quality at the level of 110 economic regions. The urban centers of Zurich, Zug, Basel, Baden, and Geneva, as well as their wider agglomerations, are among the most attractive regions for companies, not least due to their transport accessibility. Many of the changes in the regional rankings are down to changes in the tax burden at a cantonal level. The Geneva region achieved the biggest improvement compared with the previous year, with a jump of 26 positions to 12th place. The Lower Basel region is up ten positions and lies in 18th place. With ranking gains of between 17 and 21 places, various regions of Canton Fribourg likewise improved significantly: La Sarine now ranks 42nd, while the regions of Sense, Glâne/Veveyse, and La Gruyère are in 60th, 67th, and 71st place respectively. In Ticino, the Lugano and Mendrisio regions in particular offer a higher locational quality rating than their neighboring regions. The regions of the Alpine and Jura arcs are clearly less attractive from the perspective of companies, which can be explained by their topography and the often significant travel time involved to reach the main centers.

The Credit Suisse Locational Quality Indicator
The long-term economic potential of Switzerland’s cantons and regions is primarily determined by the overall conditions for businesses. Intense competition between different locations is forcing the Swiss cantons and regions to take steps to optimize their appeal on an ongoing basis. Credit Suisse economists have provided quantitative analysis of the locational quality of Swiss cantons and regions since 1997. The annual Locational Quality Indicator (LQI) was developed in order to measure the attractiveness of the Swiss regions and cantons from a business perspective. The LQI serves on the one hand as a guide to companies and entrepreneurs seeking to evaluate potential locations, and on the other as a benchmarking tool for the optimization of cantonal or regional location policy. The indicator illustrates the attractiveness of an area in the form of a relative index, based on the following seven quantitative sub-indicators: tax burden on legal entities and private individuals, availability of specialized labor and highly qualified personnel, population accessibility, employee accessibility, and access to airports.

The study “Locational quality: Zug just ahead of Basel-City, Geneva closes gap on Zurich” is available online in German, French, Italian, and English at:
www.credit-suisse.com/locationalquality

Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). Our strategy builds on Credit Suisse’s core strengths: its position as a leading wealth manager, its specialist investment banking capabilities and its strong presence in our home market of Switzerland. We seek to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. Credit Suisse employs approximately 48,800 people. The registered shares (CSGN) of Credit Suisse AG’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.

Media contacts:

Dr. Jan Schüpbach
Economist Policy & Thematic Economics
Credit Suisse AG
+41 44 333 77 36
jan.schuepbach@credit-suisse.com

Media Relations
Credit Suisse AG
+41 844 33 88 44
media.relations@credit-suisse.com

SOURCE: CREDIT SUISSE GROUP AG

MORE ON CREDIT SUISSE, ETC.:

Follow EuropaWire on Google News
EDITOR'S PICK:

Comments are closed.