Market Research

Tax Rates & Immigrants Make Swiss Regions Increasingly Attractive For Firms

Sandra Kilhof, Reporter, London, 26 September 2013

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The potential for banks and firms to have success in the
financial services hub of Switzerland,
depends firmly on the business environment established in the various regions or
cantons. Recently, differences in tax rates and immigrant flows are creating a
divide between the Swiss regions’ ability to attract new businesses. This is
the conclusion of a new locational quality analysis of the Swiss cantons
conducted by the financial services titan, Credit Suisse.

The analysis showed that cantons Zug and Zurich continue to lead the rankings thanks to
their attractiveness as low-tax locations, as well as their highly skilled
workforce and good accessibility. According to the firm, long-term economic
potential of a region depends on the operating environment for businesses and
as such, companies tend to invest in attractive locations, thereby creating
jobs, adding value, and bringing prosperity.

The research looks at seven "hard" locational
factors and provides businesses with a basis for evaluating locations. An
example of this, is how cantons Zug and Zurich
offer the highest locational quality due to its low tax rates and the ready
availability of skilled employees. Surprisingly, the analysis revealed that the number of qualified employees is directly related to the number of immigrants
in the region, with 17 per cent of the highly qualified individuals having only
moved to Switzerland
in the years since 2000. This is markedly clear in the German-speaking cities,
whereas French regions have come out lacking when it comes to qualified
employees.

In addition to these factors, the two Basel
cantons, as well as Zurich
and Aargau, shone as potential business hubs in terms of the accessibility of
the population, the workforce, and airports.

Crucially, the analysis looked closely at discretionary tax
policies and how these affect businesses looking to settle in the region. Switzerland's cantons have in recent years shown
high levels of activism in relation to corporate income tax rates, with cantons
Lucerne and
Neuchâtel having cut their tax rates sharply. In contrast, St. Gallen has lost
ground in terms of its tax attractiveness; its falling income and the cantonal
debt cap have forced the canton to take this step.

The economists at Credit Suisse also suggest that the
international controversy about corporate tax rates and the seemingly
inevitable abolition of tax privileges for special companies will bring
statutory tax rates into sharper focus for businesses. As such, “the fact that
some companies have relocated in recent times could be related to this,” said a
statement from Credit Suisse.

Consequently, the research also showed that there is an
east/west divide in terms of the availability of skilled employees with a
completed vocational apprenticeship and a town/country divide when it comes to
highly qualified employees. For instance, mountain cantons like Jura, Valais,
Neuchâtel and Graubünden bring up the rear as the regions with the least
attractive business environment, especially due to their challenging
topography, which reduces the attractiveness of their transport infrastructure.

Credit Suisse research has produced quantitative analysis of
the locational quality of the Swiss cantons and regions and published the
results annually since 1997. The method used for calculating locational quality
is based on several factors, including transport infrastructure, the
availability of skilled and highly qualified employees, business-related
traffic (i.e. the accessibility of employees) and access to airports, as well
as the tax burden for natural persons and legal entities.

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