Contact FutureLearn for Support
Skip main navigation
We use cookies to give you a better experience, if that’s ok you can close this message and carry on browsing. For more info read our cookies policy.
We use cookies to give you a better experience. Carry on browsing if you're happy with this, or read our cookies policy for more information.

Skip to 0 minutes and 9 secondsAt the beginning of the present course week, I introduced to you a practical case involving Switzerland and its European neighbours concerning corporate taxation. We saw that the European Commission, an important institution of the European Union, accused Switzerland of predatory tax regimes. We also saw that in this context, the Swiss sub-states or Cantons played an important role. In the present step, I would like to introduce you in some more detail to the Swiss state structure. The official name of Switzerland contains the term confederation, as in the Latin Confoederatio Helvetica, which you can still find on the Swiss coins. However, this term comes from an earlier stage of development.

Skip to 1 minute and 12 secondsToday, Switzerland is a federation, similar to, for example, Mexico, Germany, Russia, India, Australia, Canada, and the United States of America. All of these states are federations, made up by a number of sub-states. In Switzerland, these are called Cantons. You find the coats of arms of the Cantons at a lot of places in Switzerland. For instance, here at the Basel Town Hall, where there is a frieze of all the Cantons belonging to the Old Swiss Confederation at the time when this part of the hall was built at the beginning of the 16th century. Not surprisingly, the coats of arms also decorate the Federal Palace in Bern.

Skip to 2 minutes and 5 secondsIt is the seat of the Swiss Federal Parliament, which is the legislator on the federal level, and of the Federal Council, which is the federal government. In the cupola, a glass ceiling shows the coats of arms of the Swiss Cantons that existed at the time when this part of the building was constructed, namely from 1895 to 1902. The Canton of Jura was founded in 1978 only. Its coat of arms was added to this arch.

Skip to 2 minutes and 44 secondsHere is a map showing the locations of the various Swiss Cantons on the Swiss territory. So at present, we have 26 Cantons that, together, form the Federation. In Swiss Federal Parliament, one of the two chambers is representing the Cantons. Each Canton has two representatives there; except for the six so-called semi-cantons, with only one vote. For example, the Cantons of Basel-City and Basel-County, which together guarantee the University of Basel, are both Cantons with only one vote in the parliamentary chamber representing the Cantons.

Skip to 3 minutes and 37 secondsThe peoples' pride in their Canton sometimes finds rather creative expressions, such as in the case of the Canton of Argovia, where a confectionary shop had the sweet idea of presenting a relief of the surface of its Canton in chocolate.

Skip to 3 minutes and 59 secondsThe other chamber of the Swiss Parliament is made up of representatives of the people. I should add that in the case of the Swiss Federation, there is an additional level that plays an important role, namely the Municipalities. At present, there are some 2.300 Swiss Municipalities. In fact, every Swiss citizen is first and foremost a citizen of a Municipality and through this, also of a Canton and of the Federation. Now before turning to the meaning of the state structure for taxation, let me saviour some of the Argovia chocolate.

Skip to 4 minutes and 52 secondsMm, very nice indeed. What does the federal structure of Switzerland mean for taxation, in particular, for income taxation? In fact, taxes are levied on all levels, the Federation, the Cantons, and the Municipalities. Except for the Federation, the levels of taxation differ, meaning that there is tax competition even within Switzerland, namely, between the Cantons and between the Municipalities. In its decision on the Swiss EU dispute on corporate taxation, the European Commission noted that in 2007, the overall company tax rate, counting federal, cantonal, and municipal taxes varied from 14% to 30%, depending on where a company was established.

Skip to 5 minutes and 53 secondsIn the Swiss-EU dispute on corporate taxation, two of the three levels of the Swiss State played a role, namely, the Federation and the Cantons. For the latter, the Federal Tax Harmonisation Act defines a common framework. Art. 28 of that law allow the Cantons to introduce preferential tax regimes with respect to certain types of companies and profits. For the European Commission, this meant that the problem as perceived by it was tied to both the federal and cantonal law.

Swiss Federalism and corporate taxation

The Swiss federal state structure has important implications for corporate taxation and for the country’s global standing in this field.

In Switzerland, there is tax competition between the Swiss sub-states, the Cantons, as well as between the municipalities within the individual Cantons. The federal state structure presents challenges when it comes to international standards in this field. Some Cantonal laws on corporate taxation have attracted international criticism, notably from the European Union.

Find a map of Switzerland with the different Cantons and coats of arms in the ‘see also’ section below.

Share this video:

This video is from the free online course:

Switzerland in Europe: Money, Migration and Other Difficult Matters

University of Basel