Economic Sustainability
#4Key Findings
Switzerland falls into the sample’s top ranks (rank 4) in the category of economic sustainability.
The country does not have a policy explicitly targeting a circular economy. A national critical infrastructure protection plan is in place, but the country’s electrical power system relies on cooperation with EU. Climate policy has been complicated by a public referendum that rejected emissions-reduction targets.
The vocational training system is strong, and short-time work programs provide flexibility during crises. Authorities support various active labor market policy measures. Tax rates are moderate, especially for firms, and vary by canton. Some cantons offer tax advantages to certain firms and wealthy foreigners. The redistributive effect is low.
Budget policy is highly sustainable, with federal budget deficits rare. The overall public debt is around 28% of GDP, with federal debt at about 16%. The country spends highly on R&D. Banking secrecy laws were reformed after international criticism, allowing for international exchange of information by 2017.
The country does not have a policy explicitly targeting a circular economy. A national critical infrastructure protection plan is in place, but the country’s electrical power system relies on cooperation with EU. Climate policy has been complicated by a public referendum that rejected emissions-reduction targets.
The vocational training system is strong, and short-time work programs provide flexibility during crises. Authorities support various active labor market policy measures. Tax rates are moderate, especially for firms, and vary by canton. Some cantons offer tax advantages to certain firms and wealthy foreigners. The redistributive effect is low.
Budget policy is highly sustainable, with federal budget deficits rare. The overall public debt is around 28% of GDP, with federal debt at about 16%. The country spends highly on R&D. Banking secrecy laws were reformed after international criticism, allowing for international exchange of information by 2017.
Graph View
Graph View
How committed is the government to driving the transition toward a circular economy?
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9
9
The government is clearly committed to transitioning to a circular economy.
8
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6
7
6
The government is largely committed to transitioning to a circular economy.
5
4
3
4
3
The government is somewhat committed to transitioning to a circular economy.
2
1
1
The government is not at all committed to transitioning to a circular economy.
In 2010, the federal government signaled the move to a green economy. It decided to take action in the following areas (FOEN 2013):
1) A cleantech master plan (i.e., a master plan for using more clean technologies (cleantech), meaning technologies that do not use a large quantity of energy or environmental resources);
2) Resource-efficient information and communication technologies (ICTs);
3) Information on the environmental impact of products;
4) Greening the tax system;
5) Creating a global indicator of welfare; and
6) Drafting legislation on the issues of resource-efficiency and sustainability.
In 2020, the Federal Office for the Environment concluded: “Despite efficiency gains, Switzerland is currently far from achieving the sustainable use of resources… Switzerland is contributing to [the limits of the resilience of climate stability and ecosystems] through its high consumption of resources per capita. Additional measures are essential so that future-proof, resource-conserving consumption and production models can be strengthened….There remains much to be done to realize [the vision of a green economy and the resource-conserving economy]. Two-thirds of total environmental pollution occurs in the food and agriculture, housing and construction and mobility sectors. Resource-conserving consumption and production models can only be achieved by commitment from government, including cantons and municipalities, and all sectoral policy areas, the private sector, science and the whole of society. Along with consumers, business has to play a central role. A reliable and advantageous underlying government framework also has a major part to play” (FOEN 2020).
The European Environmental Agency concluded in its 2022 country report on Switzerland: Currently, “Switzerland … does not have a dedicated national or regional circular economy (CE) vision, strategy, action plan or roadmap. … In 2020, a parliamentary initiative to strengthen the Swiss circular economy has been initiated… This would be implemented as a change of the Environmental Protection Act. The political decision and, in the case of a referendum, a popular vote are expected for 2024” (EEA 2022).
In a similar vein, the OECD reports in its recent country survey: “Switzerland has successfully decoupled economic growth from domestic greenhouse gas emissions and material use, but environmental pressures remain. A high standard of living together with a relative lack of domestic raw materials and energy resources necessitate high imports. As a result, the material footprint per capita is significant and a large share of the associated environmental damage occurs abroad. Municipal waste per capita is among the highest in the OECD and municipal waste generation has not been decoupled from consumption, despite a number of policy instruments. Switzerland has set a net-zero greenhouse gas emissions target by 2050, but sufficient measures to achieve it remain to be adopted. Switzerland prices its CO2 emissions at high rates, but various exemptions to the carbon tax reduce its effectiveness. In addition, plans to further raise the carbon tax and introduce an air-ticket levy have recently been halted. Environmentally harmful subsidies and tax exemptions in agriculture, forestry and public transportation give rise to a pricing and incentive system that distorts the link between market signals and costs of environmental damage across sectors.”
There is room for improvement when it comes to aligning investment portfolios with climate goals and promoting eco-innovation (OECD 2022: 12). However, this does not mean that Swiss environmental policy is lacking (see the list of policies and their limitations in Ingold/Nahrath 2021: 850 – 851). Rather, the various policies are not integrated in such a way so as to deliberately target a circular economy. There are several reasons for this lack, including the following:
1) The competencies for environmental and economic policy are distributed across municipalities, the cantons and the federation. The federal agency for the environment is relatively weak in resources, and it cannot closely steer and monitor the implementation of eco-environmental policies on the ground.
2) Switzerland has eschewed the idea of an explicit and deliberate national industrial policy. Rather, policymaking takes place at various levels, with federal economic policy being very heterodox, pragmatic and poorly integrated. It is a policy of muddling through (Emmenegger 2021).
3) The Federal Office of the Environment adds also other political reasons such as: “In the past, there were no majorities for a political breakthrough in the field of green economy / circular economy,” as well as the lack of a “sense of urgency in the economy and among citizens” (EEA 2022: 9).
4) Finally, according to the Federal Office of the Environment, there are several economic reasons, including:
a. “Comparatively low prices for unsustainable products and primary resources (externalities are not internalized); there is no incentive, and businesses underestimate the potential for cost-cutting.”
b. The slow diffusion of resource-efficient technologies.
c. Low levels of acceptance of secondary raw materials on the marketplace.
d. Insufficient transparency in supply chains (EEA 2022: 9).
Citations:
EEA (European Environment Agency). 2022. “Circular Economy Country Profile -Switzerland.” https://www.eionet.europa.eu/etcs/etc-ce/products/etc-ce-products/etc-ce-report-5-2022-country-profiles-on-circular-economy/switzerland-ce-country-profile-2022_for-publication.pdf/@@download/file/Switzerland%20CE%20country%20profile%202022_for%20publication.pdf
Emmenegger, Patrick. 2021. “Wirtschafts- und Finanzpolitik.” In Handbuch der Schweizer Politik, 7th ed., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, pp.
FOEN (Federal Office for the Environment). 2013. Green Economy: Report and Action Plan. Bern/Ittingen: FOEN. https://www.bafu.admin.ch/bafu/en/home/topics/economy-consumption/info-specialists/federal-government-measures-for-resource-conservation.html
FOEN (Federal Office for the Environment). 2020. “Federal Government Measures for Resource Conservation.” https://www.bafu.admin.ch/bafu/en/home/topics/economy-consumption/info-specialists/federal-government-measures-for-resource-conservation.html
Ingold, Karin, and Stéphane Nahrath. 2021. “Politiques environnementales et d’aménagement du territoire.” In Handbuch der Schweizer Politik, 7th edition, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 835-856.
OECD. 2022. Economic Survey Switzerland 2022. Paris: OECD.
1) A cleantech master plan (i.e., a master plan for using more clean technologies (cleantech), meaning technologies that do not use a large quantity of energy or environmental resources);
2) Resource-efficient information and communication technologies (ICTs);
3) Information on the environmental impact of products;
4) Greening the tax system;
5) Creating a global indicator of welfare; and
6) Drafting legislation on the issues of resource-efficiency and sustainability.
In 2020, the Federal Office for the Environment concluded: “Despite efficiency gains, Switzerland is currently far from achieving the sustainable use of resources… Switzerland is contributing to [the limits of the resilience of climate stability and ecosystems] through its high consumption of resources per capita. Additional measures are essential so that future-proof, resource-conserving consumption and production models can be strengthened….There remains much to be done to realize [the vision of a green economy and the resource-conserving economy]. Two-thirds of total environmental pollution occurs in the food and agriculture, housing and construction and mobility sectors. Resource-conserving consumption and production models can only be achieved by commitment from government, including cantons and municipalities, and all sectoral policy areas, the private sector, science and the whole of society. Along with consumers, business has to play a central role. A reliable and advantageous underlying government framework also has a major part to play” (FOEN 2020).
The European Environmental Agency concluded in its 2022 country report on Switzerland: Currently, “Switzerland … does not have a dedicated national or regional circular economy (CE) vision, strategy, action plan or roadmap. … In 2020, a parliamentary initiative to strengthen the Swiss circular economy has been initiated… This would be implemented as a change of the Environmental Protection Act. The political decision and, in the case of a referendum, a popular vote are expected for 2024” (EEA 2022).
In a similar vein, the OECD reports in its recent country survey: “Switzerland has successfully decoupled economic growth from domestic greenhouse gas emissions and material use, but environmental pressures remain. A high standard of living together with a relative lack of domestic raw materials and energy resources necessitate high imports. As a result, the material footprint per capita is significant and a large share of the associated environmental damage occurs abroad. Municipal waste per capita is among the highest in the OECD and municipal waste generation has not been decoupled from consumption, despite a number of policy instruments. Switzerland has set a net-zero greenhouse gas emissions target by 2050, but sufficient measures to achieve it remain to be adopted. Switzerland prices its CO2 emissions at high rates, but various exemptions to the carbon tax reduce its effectiveness. In addition, plans to further raise the carbon tax and introduce an air-ticket levy have recently been halted. Environmentally harmful subsidies and tax exemptions in agriculture, forestry and public transportation give rise to a pricing and incentive system that distorts the link between market signals and costs of environmental damage across sectors.”
There is room for improvement when it comes to aligning investment portfolios with climate goals and promoting eco-innovation (OECD 2022: 12). However, this does not mean that Swiss environmental policy is lacking (see the list of policies and their limitations in Ingold/Nahrath 2021: 850 – 851). Rather, the various policies are not integrated in such a way so as to deliberately target a circular economy. There are several reasons for this lack, including the following:
1) The competencies for environmental and economic policy are distributed across municipalities, the cantons and the federation. The federal agency for the environment is relatively weak in resources, and it cannot closely steer and monitor the implementation of eco-environmental policies on the ground.
2) Switzerland has eschewed the idea of an explicit and deliberate national industrial policy. Rather, policymaking takes place at various levels, with federal economic policy being very heterodox, pragmatic and poorly integrated. It is a policy of muddling through (Emmenegger 2021).
3) The Federal Office of the Environment adds also other political reasons such as: “In the past, there were no majorities for a political breakthrough in the field of green economy / circular economy,” as well as the lack of a “sense of urgency in the economy and among citizens” (EEA 2022: 9).
4) Finally, according to the Federal Office of the Environment, there are several economic reasons, including:
a. “Comparatively low prices for unsustainable products and primary resources (externalities are not internalized); there is no incentive, and businesses underestimate the potential for cost-cutting.”
b. The slow diffusion of resource-efficient technologies.
c. Low levels of acceptance of secondary raw materials on the marketplace.
d. Insufficient transparency in supply chains (EEA 2022: 9).
Citations:
EEA (European Environment Agency). 2022. “Circular Economy Country Profile -Switzerland.” https://www.eionet.europa.eu/etcs/etc-ce/products/etc-ce-products/etc-ce-report-5-2022-country-profiles-on-circular-economy/switzerland-ce-country-profile-2022_for-publication.pdf/@@download/file/Switzerland%20CE%20country%20profile%202022_for%20publication.pdf
Emmenegger, Patrick. 2021. “Wirtschafts- und Finanzpolitik.” In Handbuch der Schweizer Politik, 7th ed., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, pp.
FOEN (Federal Office for the Environment). 2013. Green Economy: Report and Action Plan. Bern/Ittingen: FOEN. https://www.bafu.admin.ch/bafu/en/home/topics/economy-consumption/info-specialists/federal-government-measures-for-resource-conservation.html
FOEN (Federal Office for the Environment). 2020. “Federal Government Measures for Resource Conservation.” https://www.bafu.admin.ch/bafu/en/home/topics/economy-consumption/info-specialists/federal-government-measures-for-resource-conservation.html
Ingold, Karin, and Stéphane Nahrath. 2021. “Politiques environnementales et d’aménagement du territoire.” In Handbuch der Schweizer Politik, 7th edition, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 835-856.
OECD. 2022. Economic Survey Switzerland 2022. Paris: OECD.
Graph View
How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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The government is somewhat committed to updating basic technical infrastructure.
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1
The government is not at all committed to updating basic technical infrastructure.
Switzerland’s infrastructure in the field of public transportation and roads is excellent. Telecommunications function excellently, although there have been some delays in establishing the glass fiber network (Sager/Kaufmann 2022; 2023). The country’s infrastructure in the field of electricity is technically excellent, but depends very much on cooperation with the EU. As long as Switzerland and the EU do not arrive at a bilateral agreement on electricity, there remain serious risks. The Association of Swiss Electricity Companies (VSE 2023) notes: “The fact that Switzerland has no agreement with the EU on cooperation in the electricity sector is causing serious system risks that are already having a negative impact on security of supply and triggering additional costs. Switzerland is dependent on electricity imports in winter. As early as 2025, Switzerland’s import capability could be severely restricted.”
The Federal Council adopted the National Strategy for Critical Infrastructure Protection (CIP) on 16 June 2023, revising the versions of 2012 and 2017. The Federal Office for Civil Protection (FOCP, Bundesamt für Bevölkerungsschutz) summarizes the strategy as follows:
“Switzerland’s new national CIP strategy defines the overriding goals and principles of action for all parties involved. The strategy also identifies eight measures to improve the country’s resilience with regard to its critical infrastructure. For example, the responsible supervisory and regulatory authorities have been tasked with examining all sectors for any significant risk of major supply disruption, as well as taking measures to mitigate this. A further measure involves compiling an inventory, to be updated periodically, of the main objects and operators in Switzerland. These can include important hubs for communication, the power supply, food distribution and the provision of medicines.
The implementation of the national CIP strategy is closely monitored by the Federal Council’s Energy, Environment and Infrastructure delegation. The Federal Office for Civil Protection (FOCP) is responsible for coordinating the strategy’s implementation, which will be carried out in close cooperation with the operators of critical infrastructure, supervisory and regulatory authorities in various sectors, and the cantons. Although the CIP strategy currently applies indefinitely, the FOCP will assess every four years whether an update is required” (FOCP 2023).
Citations:
Association of Swiss Electricity Companies (VSE, Verband Schweizerischer Elektrizitätsunternehmen). 2023. “https://www.strom.ch/de/politik/stromabkommen”
FOCP (Federal Office for Civil Protection, Bundesamt für Bevölkerungsschutz). 2023. “Critical Infrastructure Protection.” https://www.babs.admin.ch/en/aufgabenbabs/ski.html
Sager, Fritz, and David Kaufmann. 2022. “Infrastrukturpolitik: Verkehr, Energie und Telekommunikation.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th edition, 757-784.
Sager, Fritz, and David Kaufmann. 2023. “Infrastructure Policy: Transport and Energy.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 585–603. https://doi.org/10.1093/oxfordhb/9780192871787.013.30.
Schweizerische Eidgenossenschaft. 2023. Nationale Strategie zum Schutz kritischer Infrastrukturen. Ganzheitlicher Ansatz zur Sicherstellung der Verfügbarkeit von essenziellen Gütern und Dienstleistungen. Bern: Schweizerische Eidgenossenschaft, BBI 2023 1659. Accessed on 2023 12 10 via https://www.babs.admin.ch/en/aufgabenbabs/ski.html
The Federal Council adopted the National Strategy for Critical Infrastructure Protection (CIP) on 16 June 2023, revising the versions of 2012 and 2017. The Federal Office for Civil Protection (FOCP, Bundesamt für Bevölkerungsschutz) summarizes the strategy as follows:
“Switzerland’s new national CIP strategy defines the overriding goals and principles of action for all parties involved. The strategy also identifies eight measures to improve the country’s resilience with regard to its critical infrastructure. For example, the responsible supervisory and regulatory authorities have been tasked with examining all sectors for any significant risk of major supply disruption, as well as taking measures to mitigate this. A further measure involves compiling an inventory, to be updated periodically, of the main objects and operators in Switzerland. These can include important hubs for communication, the power supply, food distribution and the provision of medicines.
The implementation of the national CIP strategy is closely monitored by the Federal Council’s Energy, Environment and Infrastructure delegation. The Federal Office for Civil Protection (FOCP) is responsible for coordinating the strategy’s implementation, which will be carried out in close cooperation with the operators of critical infrastructure, supervisory and regulatory authorities in various sectors, and the cantons. Although the CIP strategy currently applies indefinitely, the FOCP will assess every four years whether an update is required” (FOCP 2023).
Citations:
Association of Swiss Electricity Companies (VSE, Verband Schweizerischer Elektrizitätsunternehmen). 2023. “https://www.strom.ch/de/politik/stromabkommen”
FOCP (Federal Office for Civil Protection, Bundesamt für Bevölkerungsschutz). 2023. “Critical Infrastructure Protection.” https://www.babs.admin.ch/en/aufgabenbabs/ski.html
Sager, Fritz, and David Kaufmann. 2022. “Infrastrukturpolitik: Verkehr, Energie und Telekommunikation.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th edition, 757-784.
Sager, Fritz, and David Kaufmann. 2023. “Infrastructure Policy: Transport and Energy.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 585–603. https://doi.org/10.1093/oxfordhb/9780192871787.013.30.
Schweizerische Eidgenossenschaft. 2023. Nationale Strategie zum Schutz kritischer Infrastrukturen. Ganzheitlicher Ansatz zur Sicherstellung der Verfügbarkeit von essenziellen Gütern und Dienstleistungen. Bern: Schweizerische Eidgenossenschaft, BBI 2023 1659. Accessed on 2023 12 10 via https://www.babs.admin.ch/en/aufgabenbabs/ski.html
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
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9
9
The government is clearly committed to transitioning to a decarbonized energy system.
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7
6
The government is largely committed to transitioning to a decarbonized energy system.
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3
4
3
The government is somewhat committed to transitioning to a decarbonized energy system.
2
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1
The government is not at all committed to transitioning to a decarbonized energy system.
Currently, two legislative projects are furthering decarbonization. On 18 June 2023, the people voted to approve a new Federal Act on Climate Protection Objectives, Innovation and Energy Security. It enshrines the country’s net-zero target of CO2 emissions into law. “It further defines interim and sectoral targets toward 2040 and 2050, introduces a subsidy scheme to replace heating systems with heat pumps and, as a framework law, it further mandates the creation of measures in several fields connected to climate mitigation and adaptation” (Climate Action Tracker 2023). Article 3 of this law states: “The confederation shall ensure that the impact of man-made greenhouse gas emissions in Switzerland is zero by 2050 (net-zero target) by reducing greenhouse gas emissions as far as possible; and the effect of the remaining greenhouse gas emissions is offset by the use of negative emission technologies in Switzerland and abroad.” Article 4 defines actions by sectors (such as traffic, industry, buildings) and Article 5 requires enterprises to reach a point of net-zero emissions by 2050. Article 10 states: “The confederation and cantons act as role models in terms of achieving the goal of net-zero emissions and adapting to the effects of climate change.” This law is a framework law, mostly programmatic at this point. The various objectives must be achieved by separate special laws.
The second legislative project is still in the making. It is the so-called CO2 succession law: “By ratifying the Paris Agreement, Switzerland has committed in a next step to reducing greenhouse gas emissions by at least 50% compared to 1990 by 2030. A total revision of the CO2 Act was supposed to have defined the measures for achieving this target by 2030. But on 13 June 2021, the Swiss electorate rejected the revised CO2 Act. Parliament therefore decided on a transitional arrangement. This requires that greenhouse gas emissions be reduced by a further 1.5% annually by 2024 compared to 1990 and continues measures that would have expired at the end of 2021 without such a regulation. For the period after 2024, a new revision of the CO2 Act is necessary. The Federal Council submitted a new bill to parliament to this end in September 2022” (FOEN 2023).
By December 2023, the respective committees of both chambers of parliament had discussed the bill. On 20 December 2023, the House of Representatives (Nationalrat) indicated its support for the new law in principle, with some differences with regard to the decisions made by the upper house (Ständerat, Council of States). After the final decision in parliament, the new law will likely be subject to a popular vote (Swiss Parliament 2023).
These laws suffer from the downside of Swiss consensus democracy, which hinders ambitious changes aimed at sustainability transition because of the need to integrate a vast array of players with opposing interests into the policymaking process.
On the one hand, on paper, Switzerland is committed to the decarbonization of its economy by the Federal Act on Climate Protection Objectives, Innovation and Energy Security. The overall strategy is well-developed. On the other hand, this framework law needs to be implemented by various laws. The government is an oversized four-party coalition that must develop compromises among all its constituent political parties, ranging from a very pro-environment Social Democratic Party to a much more skeptical right-populist party, as well as industrial actors. Major decisions are made not only by the parliament, but also via direct-democratic popular votes. Finally, decarbonization strategies must also be supported by the cantons, which can at least modify federal laws in the process of implementation. Hence the notion of a central government able to implement a decarbonization strategy as a coherent policy in a top-down mode is not compatible with the basic institutional setup of the Swiss political system (see also Ingold/Narath 2021: 847-849, Ingold et al. 2016).
Citations:
Bundesgesetz über die Ziele im Klimaschutz, die Innovation und die Stärkung der Energiesicherheit vom 30. September 2022. 2022. BBl 2022 2403. https://www.fedlex.admin.ch/eli/fga/2022/2403/de
Climate Action Tracker. 2023. “Climate Action Tracker Switzerland.” https://climateactiontracker.org/countries/switzerland/
Federal Office for the Environment, Bundesamt für Umwelt. 2023. “FOEN 2023.” https://www.bafu.admin.ch/bafu/de/home/themen/klima/inkuerze.html
Ingold, Karin, and Stéphane Nahrath. 2021. “Politiques environnementales et d’aménagement du territoire.” In Handbuch der Schweizer Politik. Th edition, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 835-856.
Ingold, Karin, Eva Lieberherr, Isabelle Schläpfer, Kathrin Steinmann, and Willi Zimmermann. 2016. Umweltpolitik der Schweiz. Ein Lehrbuch. Zürich/St. Gallen: Dike.
Swiss Parliament. 2023. “https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20220061, accessed on 2023 12 27”
The second legislative project is still in the making. It is the so-called CO2 succession law: “By ratifying the Paris Agreement, Switzerland has committed in a next step to reducing greenhouse gas emissions by at least 50% compared to 1990 by 2030. A total revision of the CO2 Act was supposed to have defined the measures for achieving this target by 2030. But on 13 June 2021, the Swiss electorate rejected the revised CO2 Act. Parliament therefore decided on a transitional arrangement. This requires that greenhouse gas emissions be reduced by a further 1.5% annually by 2024 compared to 1990 and continues measures that would have expired at the end of 2021 without such a regulation. For the period after 2024, a new revision of the CO2 Act is necessary. The Federal Council submitted a new bill to parliament to this end in September 2022” (FOEN 2023).
By December 2023, the respective committees of both chambers of parliament had discussed the bill. On 20 December 2023, the House of Representatives (Nationalrat) indicated its support for the new law in principle, with some differences with regard to the decisions made by the upper house (Ständerat, Council of States). After the final decision in parliament, the new law will likely be subject to a popular vote (Swiss Parliament 2023).
These laws suffer from the downside of Swiss consensus democracy, which hinders ambitious changes aimed at sustainability transition because of the need to integrate a vast array of players with opposing interests into the policymaking process.
On the one hand, on paper, Switzerland is committed to the decarbonization of its economy by the Federal Act on Climate Protection Objectives, Innovation and Energy Security. The overall strategy is well-developed. On the other hand, this framework law needs to be implemented by various laws. The government is an oversized four-party coalition that must develop compromises among all its constituent political parties, ranging from a very pro-environment Social Democratic Party to a much more skeptical right-populist party, as well as industrial actors. Major decisions are made not only by the parliament, but also via direct-democratic popular votes. Finally, decarbonization strategies must also be supported by the cantons, which can at least modify federal laws in the process of implementation. Hence the notion of a central government able to implement a decarbonization strategy as a coherent policy in a top-down mode is not compatible with the basic institutional setup of the Swiss political system (see also Ingold/Narath 2021: 847-849, Ingold et al. 2016).
Citations:
Bundesgesetz über die Ziele im Klimaschutz, die Innovation und die Stärkung der Energiesicherheit vom 30. September 2022. 2022. BBl 2022 2403. https://www.fedlex.admin.ch/eli/fga/2022/2403/de
Climate Action Tracker. 2023. “Climate Action Tracker Switzerland.” https://climateactiontracker.org/countries/switzerland/
Federal Office for the Environment, Bundesamt für Umwelt. 2023. “FOEN 2023.” https://www.bafu.admin.ch/bafu/de/home/themen/klima/inkuerze.html
Ingold, Karin, and Stéphane Nahrath. 2021. “Politiques environnementales et d’aménagement du territoire.” In Handbuch der Schweizer Politik. Th edition, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 835-856.
Ingold, Karin, Eva Lieberherr, Isabelle Schläpfer, Kathrin Steinmann, and Willi Zimmermann. 2016. Umweltpolitik der Schweiz. Ein Lehrbuch. Zürich/St. Gallen: Dike.
Swiss Parliament. 2023. “https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20220061, accessed on 2023 12 27”
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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9
Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
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Labor market institutions are not at all aligned with the goal of an adaptable labor market.
In Switzerland, developing skills throughout working life may happen by way of vocational training, professional education, continuing education and training, universities of applied sciences, and general university training (see SERI 2022). In international comparison, there are arguably two outstanding elements of the system of opportunities to develop skills in Switzerland: a) Switzerland is a prominent case of strong reliance on vocational training. About two-thirds of all school leavers start vocational training, in the form of basic training within enterprises that is accompanied by study within public vocational training schools. b) The educational system is highly permeable: After vocational training, a frequently utilized route to higher qualification at the tertiary level is via vocational education either at universities of applied sciences or at universities. The fields most frequently studied at professional education institutions are nursing, business management and social pedagogy (data of 2020).
The universities of applied sciences were introduced in 1997. A typical route to universities of applied sciences is via vocational training which is combined with a vocational baccalaureate (either in parallel or after vocational training), the latter being the criterion for acceptance at the universities of applied sciences. In 2019, entrants at universities of applied sciences made up 1.8% of the cohort aged 20 to 29, as compared to 2.0% at universities (Emmenegger et al. 2023: 365). This indicates that the route to tertiary degrees via universities of applied sciences is almost as important as the traditional route via general universities. There is also some permeability between professional education institutions and universities of applied sciences, and between the latter and universities. Hence, while in countries such as Germany, upskilling in the knowledge economy relies very heavily on the expansion of general universities, the Swiss pathway is marked by the strong expansion of both general universities and universities of applied science. Having said this, the total share of people holding tertiary education degrees in Switzerland (45% of the population between 25 and 64) is still lower than in neighboring Austria (50%) and Germany (51%) – but higher than in Italy (43%) or France (41%) (OECD 2023).
High-quality vocational education and opportunities for closely related upskilling depend strongly on employers’ willingness to invest in education. In the literature, it is frequently argued that in coordinated market economies based on high-quality industrial production such as Switzerland, employers have strong incentives to support vocational education (Hall/Soskice 2001). A second argument for the peculiarities of the Swiss system of upskilling points to weak trade unions and the strong role played by employers in defining vocational training curricula, making upskilling after vocational training an attractive option (Emmenegger et al. 2023).
The employment agencies (Regional Arbeitsvermittlungszentren) are organized in a decentralized way. Their efficiency varies by region, but can be judged as being at least sufficient. Hence, they facilitate worker mobility across firms, industries and regions. There is no explicit attempt to facilitate worker mobility to other countries. However, Switzerland is seeking formal membership or association with the European Network of Public Employment Services (SECO 2023) – which is dependent on Switzerland’s future relations with the EU. Two major problems within the system of employment agencies are the strong variation in efficiency across regions and the lack of sufficient coordination with other public institutions (such as social assistance and social security agencies). There have been attempts to improve this interinstitutional cooperation (Federal Council 2013; Bonoli & Fossati 2022; Interinstitutionelle Zusammenarbeit 2023).
Short-time work programs are an established practice in Switzerland. The scheme was extensively applied during the recent pandemic, based on corporatist tripartite policy development by employers, the state and trade unions (Armingeon & Sager 2022).
Citations:
Armingeon, Klaus, and Fritz Sager. 2022. “Muting Science: Input Overload Versus Scientific Advice in Swiss Policy Making During the Covid-19 Pandemic.” The Political Quarterly 93(3): 424-432.
Bonoli, Giuliano, and Flavia Fossati. 2022. “Les politiques sociales.” In *Handbuch der Schweizer Politik*, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th ed. 883-902.
Emmenegger, Patrick, Scherwin M. Bajka, and Cecilia Ivardi. 2023. “How Coordinated Capitalism Adapts to the Knowledge Economy: Different Upskilling Strategies in Germany and Switzerland.” Swiss Political Science Review 29(4): 355-378.
Federal Council. 2023. Wirksamkeit und Effizienz der öffentlichen Arbeitsvermittlung. Bericht in Erfüllung des Postulates 13.3361 der Kommission für Wirtschaft und Abgaben NR vom 22. April 2013. Bern: Federal Council.
Hall, Peter A., and David Soskice, eds. 2001. Varieties of Capitalism. The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.
Interinstitutionelle Zusammenarbeit (Interinstitutional co-operation): https://www.iiz.ch/de/ueber-uns
OECD. 2023. “Adult Education Level (Indicator).” doi: 10.1787/36bce3fe-en.
SECO (State Secretariate for Economy). 2018. “Die Wirkung von.”
Arbeitsmarktlichen Massnahmen. 2018. “Eine Analyse bisheriger Evaluationen.” SECO Publikation, Arbeitsmarktpolitik No 54. https://www.seco.admin.ch/seco/de/home/Publikationen_Dienstleistungen/Publikationen_und_Formulare/Arbeit/Arbeitsmarkt/Informationen_Arbeitsmarktforschung/wirkung-arbeitsmarktlichen-massnahmen.html
SECO (State Secretariate for Economy). 2023. “https://www.arbeit.swiss/secoalv/en/home/menue/institutionen-medien/internationale-kooperation.html”.
State Secretariate for Education, Research and Innovation (SERI). 2022. Vocational and Professional Education and Training in Switzerland. Facts and Figures 2022. Bern: SERI.
The universities of applied sciences were introduced in 1997. A typical route to universities of applied sciences is via vocational training which is combined with a vocational baccalaureate (either in parallel or after vocational training), the latter being the criterion for acceptance at the universities of applied sciences. In 2019, entrants at universities of applied sciences made up 1.8% of the cohort aged 20 to 29, as compared to 2.0% at universities (Emmenegger et al. 2023: 365). This indicates that the route to tertiary degrees via universities of applied sciences is almost as important as the traditional route via general universities. There is also some permeability between professional education institutions and universities of applied sciences, and between the latter and universities. Hence, while in countries such as Germany, upskilling in the knowledge economy relies very heavily on the expansion of general universities, the Swiss pathway is marked by the strong expansion of both general universities and universities of applied science. Having said this, the total share of people holding tertiary education degrees in Switzerland (45% of the population between 25 and 64) is still lower than in neighboring Austria (50%) and Germany (51%) – but higher than in Italy (43%) or France (41%) (OECD 2023).
High-quality vocational education and opportunities for closely related upskilling depend strongly on employers’ willingness to invest in education. In the literature, it is frequently argued that in coordinated market economies based on high-quality industrial production such as Switzerland, employers have strong incentives to support vocational education (Hall/Soskice 2001). A second argument for the peculiarities of the Swiss system of upskilling points to weak trade unions and the strong role played by employers in defining vocational training curricula, making upskilling after vocational training an attractive option (Emmenegger et al. 2023).
The employment agencies (Regional Arbeitsvermittlungszentren) are organized in a decentralized way. Their efficiency varies by region, but can be judged as being at least sufficient. Hence, they facilitate worker mobility across firms, industries and regions. There is no explicit attempt to facilitate worker mobility to other countries. However, Switzerland is seeking formal membership or association with the European Network of Public Employment Services (SECO 2023) – which is dependent on Switzerland’s future relations with the EU. Two major problems within the system of employment agencies are the strong variation in efficiency across regions and the lack of sufficient coordination with other public institutions (such as social assistance and social security agencies). There have been attempts to improve this interinstitutional cooperation (Federal Council 2013; Bonoli & Fossati 2022; Interinstitutionelle Zusammenarbeit 2023).
Short-time work programs are an established practice in Switzerland. The scheme was extensively applied during the recent pandemic, based on corporatist tripartite policy development by employers, the state and trade unions (Armingeon & Sager 2022).
Citations:
Armingeon, Klaus, and Fritz Sager. 2022. “Muting Science: Input Overload Versus Scientific Advice in Swiss Policy Making During the Covid-19 Pandemic.” The Political Quarterly 93(3): 424-432.
Bonoli, Giuliano, and Flavia Fossati. 2022. “Les politiques sociales.” In *Handbuch der Schweizer Politik*, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th ed. 883-902.
Emmenegger, Patrick, Scherwin M. Bajka, and Cecilia Ivardi. 2023. “How Coordinated Capitalism Adapts to the Knowledge Economy: Different Upskilling Strategies in Germany and Switzerland.” Swiss Political Science Review 29(4): 355-378.
Federal Council. 2023. Wirksamkeit und Effizienz der öffentlichen Arbeitsvermittlung. Bericht in Erfüllung des Postulates 13.3361 der Kommission für Wirtschaft und Abgaben NR vom 22. April 2013. Bern: Federal Council.
Hall, Peter A., and David Soskice, eds. 2001. Varieties of Capitalism. The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.
Interinstitutionelle Zusammenarbeit (Interinstitutional co-operation): https://www.iiz.ch/de/ueber-uns
OECD. 2023. “Adult Education Level (Indicator).” doi: 10.1787/36bce3fe-en.
SECO (State Secretariate for Economy). 2018. “Die Wirkung von.”
Arbeitsmarktlichen Massnahmen. 2018. “Eine Analyse bisheriger Evaluationen.” SECO Publikation, Arbeitsmarktpolitik No 54. https://www.seco.admin.ch/seco/de/home/Publikationen_Dienstleistungen/Publikationen_und_Formulare/Arbeit/Arbeitsmarkt/Informationen_Arbeitsmarktforschung/wirkung-arbeitsmarktlichen-massnahmen.html
SECO (State Secretariate for Economy). 2023. “https://www.arbeit.swiss/secoalv/en/home/menue/institutionen-medien/internationale-kooperation.html”.
State Secretariate for Education, Research and Innovation (SERI). 2022. Vocational and Professional Education and Training in Switzerland. Facts and Figures 2022. Bern: SERI.
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
10
9
9
Labor market institutions are fully aligned with the goal of an inclusive labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an inclusive labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Switzerland combines a generous system of unemployment benefits with various active labor market policy (ALMP) measures. The latter were introduced in 1997. They aim at the (re-)integration of workers into the labor market, for example, through improved employment agencies and various courses. There is a strong emphasis on job-search activities, and the system offers incentives for the acceptance of new jobs.
A recent meta-analysis of previous evaluations concluded: “Depending on the form, participants and time of availability, a specific offer can be more or less effective. The fact that both positive and negative evaluation results are available for all types of [active labor market policy], signal[ed] a great heterogeneity in the effect…. The analysis shows, for example, that employment programs, coaching offers and interim earnings score above average in evaluations. In the case of basic programs and specialist courses, on the other hand, every second evaluation shows a negative result” (SECO 2018: iii). Hence, it is more appropriate to distinguish between various ALMP elements rather than drawing a general conclusion about Swiss ALMP as a whole (see in general Kluve 2010).
Even with regard to a single policy element, effects vary by groups of workers. A recent study of ALMP in the Swiss hotel industry found that participation in ALMP measures sends signals to prospective employers. They tend to become skeptical about applications by stronger candidates (such as those seeking a job as receptionist) if they participated in ALMP measures, while low-skilled candidates (such as those applying to be a room cleaner) were evaluated more positively if they had previously taken part in ALMP courses (Liechti et al. 2017).
In its recent Economic Survey, the OECD praised the achievements of Swiss labor market policy, in particular the active labor market strategies and the coordination and evaluation of decentralized actors by federal institutions. It also suggested that active labor market policies be further expanded, in particular via hiring subsidies and job-insertion allowances (OECD 2022: 86 – 88).
Switzerland’s economy is close to full employment, and employers seek to attract new workers. Policymakers try to mobilize the working-age population to enter the labor market, thereby reducing reliance as much as possible on foreign labor recruitment. Arguably, the following elements are important in this regard:
a) Some married couples (especially those with children) pay higher taxes than unmarried couples, as they are taxed jointly. This provides incentives either not to marry, not to enter the labor market or to limit labor market participation (i.e., to engage in part-time work) if the partner’s income is sufficient. There are currently several political attempts underway to change this differential tax treatment (NZZ 6 May 2023).
b) Wage tax is comparatively low in Switzerland (but varies considerably between municipalities and cantons), so the low general tax burden does not reduce the incentive to enter the labor market.
c) Family policy in Switzerland lags behind the general development in rich European nations (Häusermann/Bürgisser 2022). Given the lack or high cost of childcare facilities, couples have to decide whether one partner (typically the woman) will stay at home looking after the children, or both will take up gainful employment with a large share of the additional income spent on childcare.
d) Swiss labor market regulations follow to a liberal model that offers comparatively little job security for workers, but also contains some flexible rules. Among these is a high level of flexibility regarding part-time employment. Swiss employment rates are very high, particularly for women, due to a comparatively high share of part-time employment.
Switzerland has a very low youth unemployment rate, which is on par with the general unemployment rate. This is due to the efficient system of vocational training and other aspects of public education, as well as generally excellent labor market conditions. A number of policies and institutions help integrate unemployed young people into the labor market (SECO 2020, SECO n.d.). However, some categories of worker face specific labor market issues: Elderly working immigrants, such as those recruited in the 1950 through 1970s from Southern and Eastern Europe for low-skill jobs, experience precarious socioeconomic situations more often than nationals, and are at higher risk of an early exit from the market due to health issues often related to tough working conditions (Bolzman 2012).
Given the liberal labor market policy, public policies aimed at facilitating a work-life balance (e.g., through remote work) are very limited. It is up to the social partners to find appropriate rules for achieving this balance. During the pandemic, remote work has been generally established, and it has become widely accepted that employees will to some extent work at home if they want to, and if the job allows for such remote work.
Citations:
Claudio Bolzman. 2012. “Democratization of Ageing: Also a Reality for Elderly Immigrants?” European Journal of Social Work 15 (1): 97-113. DOI: 10.1080/13691457.2011.562018
Häusermann, Silja, and Reto Bürgisser. 2022. “Familienpolitik.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th ed., 931-954.
Kluve, Jochen. 2010. “The Effectiveness of European Active Labor Market Programs.” Labour Economics 17 (6): 904-918.
Liechti, Fabienne, Flavia Fossati, Giuliano Bonoli, and Daniel Auer. 2017. “The Signalling Value of Labour Market Programmes.” European Sociological Review 33(2): 257-274.
NZZ (Neue Zürcher Zeitung). 2022. “Die Heiratsstrafe trifft vor allem Familien mit Kindern.” https://www.nzz.ch/nzzas/nzz-am-sonntag/die-heiratsstrafe-trifft-vor-allem-familien-mit-kindern
OECD. 2022. Economic Survey Switzerland. Paris: OECD.
SECO (State Secretariate for Economy). 2018. “Die Wirkung von.”
Arbeitsmarktlichen Massnahmen. 2018. Eine Analyse bisheriger Evaluationen. Bern: SECO Publikation, Arbeitsmarktpolitik No 54. https://www.seco.admin.ch/seco/de/home/Publikationen_Dienstleistungen/Publikationen_und_Formulare/Arbeit/Arbeitsmarkt/Informationen_Arbeitsmarktforschung/wirkung-arbeitsmarktlichen-massnahmen.html
SECO (State Secretariate for Economy). 2020. Bericht. Arbeitslosigkeit 15- bis 24-Jährig. Bern: SECO. Accessed via https://www.seco.admin.ch/seco/de/home/Arbeit/Arbeitslosenversicherung/arbeitslosigkeit/Jugendarbeitslosigkeit.html, 2023 12 27.
SECO (State Secretariate for Economy). n.d. “Faktenblatt: Wie die Arbeitslosenver.”
sicherung junge Arbeitslose unterstützt, Bern: SEC, accessed via https://www.seco.admin.ch/seco/de/home/Arbeit/Arbeitslosenversicherung/arbeitslosigkeit/Jugendarbeitslosigkeit.html, 2023 12 27.
A recent meta-analysis of previous evaluations concluded: “Depending on the form, participants and time of availability, a specific offer can be more or less effective. The fact that both positive and negative evaluation results are available for all types of [active labor market policy], signal[ed] a great heterogeneity in the effect…. The analysis shows, for example, that employment programs, coaching offers and interim earnings score above average in evaluations. In the case of basic programs and specialist courses, on the other hand, every second evaluation shows a negative result” (SECO 2018: iii). Hence, it is more appropriate to distinguish between various ALMP elements rather than drawing a general conclusion about Swiss ALMP as a whole (see in general Kluve 2010).
Even with regard to a single policy element, effects vary by groups of workers. A recent study of ALMP in the Swiss hotel industry found that participation in ALMP measures sends signals to prospective employers. They tend to become skeptical about applications by stronger candidates (such as those seeking a job as receptionist) if they participated in ALMP measures, while low-skilled candidates (such as those applying to be a room cleaner) were evaluated more positively if they had previously taken part in ALMP courses (Liechti et al. 2017).
In its recent Economic Survey, the OECD praised the achievements of Swiss labor market policy, in particular the active labor market strategies and the coordination and evaluation of decentralized actors by federal institutions. It also suggested that active labor market policies be further expanded, in particular via hiring subsidies and job-insertion allowances (OECD 2022: 86 – 88).
Switzerland’s economy is close to full employment, and employers seek to attract new workers. Policymakers try to mobilize the working-age population to enter the labor market, thereby reducing reliance as much as possible on foreign labor recruitment. Arguably, the following elements are important in this regard:
a) Some married couples (especially those with children) pay higher taxes than unmarried couples, as they are taxed jointly. This provides incentives either not to marry, not to enter the labor market or to limit labor market participation (i.e., to engage in part-time work) if the partner’s income is sufficient. There are currently several political attempts underway to change this differential tax treatment (NZZ 6 May 2023).
b) Wage tax is comparatively low in Switzerland (but varies considerably between municipalities and cantons), so the low general tax burden does not reduce the incentive to enter the labor market.
c) Family policy in Switzerland lags behind the general development in rich European nations (Häusermann/Bürgisser 2022). Given the lack or high cost of childcare facilities, couples have to decide whether one partner (typically the woman) will stay at home looking after the children, or both will take up gainful employment with a large share of the additional income spent on childcare.
d) Swiss labor market regulations follow to a liberal model that offers comparatively little job security for workers, but also contains some flexible rules. Among these is a high level of flexibility regarding part-time employment. Swiss employment rates are very high, particularly for women, due to a comparatively high share of part-time employment.
Switzerland has a very low youth unemployment rate, which is on par with the general unemployment rate. This is due to the efficient system of vocational training and other aspects of public education, as well as generally excellent labor market conditions. A number of policies and institutions help integrate unemployed young people into the labor market (SECO 2020, SECO n.d.). However, some categories of worker face specific labor market issues: Elderly working immigrants, such as those recruited in the 1950 through 1970s from Southern and Eastern Europe for low-skill jobs, experience precarious socioeconomic situations more often than nationals, and are at higher risk of an early exit from the market due to health issues often related to tough working conditions (Bolzman 2012).
Given the liberal labor market policy, public policies aimed at facilitating a work-life balance (e.g., through remote work) are very limited. It is up to the social partners to find appropriate rules for achieving this balance. During the pandemic, remote work has been generally established, and it has become widely accepted that employees will to some extent work at home if they want to, and if the job allows for such remote work.
Citations:
Claudio Bolzman. 2012. “Democratization of Ageing: Also a Reality for Elderly Immigrants?” European Journal of Social Work 15 (1): 97-113. DOI: 10.1080/13691457.2011.562018
Häusermann, Silja, and Reto Bürgisser. 2022. “Familienpolitik.” In Handbuch der Schweizer Politik, eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. 7th ed., 931-954.
Kluve, Jochen. 2010. “The Effectiveness of European Active Labor Market Programs.” Labour Economics 17 (6): 904-918.
Liechti, Fabienne, Flavia Fossati, Giuliano Bonoli, and Daniel Auer. 2017. “The Signalling Value of Labour Market Programmes.” European Sociological Review 33(2): 257-274.
NZZ (Neue Zürcher Zeitung). 2022. “Die Heiratsstrafe trifft vor allem Familien mit Kindern.” https://www.nzz.ch/nzzas/nzz-am-sonntag/die-heiratsstrafe-trifft-vor-allem-familien-mit-kindern
OECD. 2022. Economic Survey Switzerland. Paris: OECD.
SECO (State Secretariate for Economy). 2018. “Die Wirkung von.”
Arbeitsmarktlichen Massnahmen. 2018. Eine Analyse bisheriger Evaluationen. Bern: SECO Publikation, Arbeitsmarktpolitik No 54. https://www.seco.admin.ch/seco/de/home/Publikationen_Dienstleistungen/Publikationen_und_Formulare/Arbeit/Arbeitsmarkt/Informationen_Arbeitsmarktforschung/wirkung-arbeitsmarktlichen-massnahmen.html
SECO (State Secretariate for Economy). 2020. Bericht. Arbeitslosigkeit 15- bis 24-Jährig. Bern: SECO. Accessed via https://www.seco.admin.ch/seco/de/home/Arbeit/Arbeitslosenversicherung/arbeitslosigkeit/Jugendarbeitslosigkeit.html, 2023 12 27.
SECO (State Secretariate for Economy). n.d. “Faktenblatt: Wie die Arbeitslosenver.”
sicherung junge Arbeitslose unterstützt, Bern: SEC, accessed via https://www.seco.admin.ch/seco/de/home/Arbeit/Arbeitslosenversicherung/arbeitslosigkeit/Jugendarbeitslosigkeit.html, 2023 12 27.
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
10
9
9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
Switzerland has a well-developed system of generous unemployment benefits and an active labor market policy. Unemployment benefits are available for traditional employees; the self-employed are not covered by unemployment insurance. Generally, the unemployed are entitled to unemployment benefits if they are unemployed for at least two days, if they are residents of Switzerland (foreigners need to have a valid long-term or basic residence permit), and if they have contributed to the unemployment insurance program for at least 12 months. Students who cannot get a job after finishing their studies can apply for unemployment benefits after a waiting period of 120 days (work.swiss 2023). Unemployment benefits are not extended to undocumented migrants, whose number is difficult to determine, but was estimated between 100,000 and 300,000 in 2005, and who fill the needs of the labor market (Longchamp et al. 2005).
Trade union density in Switzerland is low by international comparison. Due to corporatist integration and the opportunities offered by direct democracy, unions’ political influence may be greater than the density figures suggest. But generally, unions’ power is limited, making them a junior partner in a corporatist system dominated by employers and their organizations (Armingeon 2007, 2011; Mach et al. 2020; Mach/Eichenberger 2022). However, due to the so-called flanking measures of the bilateral agreements with the EU, a large share of jobs are covered by generally applicable collective agreements (erga-omnes-rules) (Oesch 2011). In 2022, about 50% of all jobs were covered by collective agreements, and among these, every second job was covered by a generally applicable collective agreement (FSO 2023).
Social rights within Switzerland are strongly portable. Social policy is mainly regulated at the federal level. The most important social insurance programs – unemployment and pensions (1st pillar) – are federal-level systems, although they are implemented at the regional level. The second pension pillar is run by private pension funds, but assets can be shifted between these funds in the event of a change of employer.
Citations:
Armingeon, Klaus. 1997. “Swiss Corporatism in Comparative Perspective.” West European Politics 20(4): 164-179.
Armingeon, Klaus. 2011. “A Prematurely Announced Death? Swiss Corporatism in Comparative Perspective.” In Switzerland in Europe: Continuity and Change in the Swiss Political Economy, eds. Christine Trampusch and André Mach. London/New York: Routledge.
FSO (Federal Statistical Office, Bundesamt für Statistik). 2023. “Gesamtarbeitsverträge nach Typ, Grösse und Wirtschaftssektor.” https://www.bfs.admin.ch/bfs/en/home/statistics/work-income.assetdetail.28985683.html
Claude Longchamp, Monia Aebersold, Bianca Rousselot, Silvia Ratelband-Pally. 2005. Sans-papiers en Suisse.
c’est le marché de l’emploi qui est déterminant, non pas la politique d’asile. Rapport final sur mandat de l’Office fédéral des migrations, Gfs.Bern.
Mach, André, Frédéric Varone, and Steven Eichenberger. 2020. “Transformations of Swiss Neo-Corporatism: From Pre-Parliamentary Negotiations toward Privileged Pluralism in the Parliamentary Venue.” In The European Social Model under Pressure, eds. Romana Careja, Patrick Emmenegger, and Nathalie Giger. Wiesbaden: Springer Fachmedien Wiesbaden, 51-68.
Mach, André, and Steven Eichenberg. 2022. “Associations d’intérêts.” In Handbuch der Schweizer Politik. 7. Auflage., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 439-464.
Oesch, Daniel. 2011. “Swiss Trade Unions and Industrial Relations After 1990. A History of Decline and Renewal.” In Switzerland in Europe: Continuity and Change in the Swiss Political Economy, eds. Christine Trampusch and André Mach. London/New York: Routledge, 82-102.
Work.swiss. 2023. “FAQ Arbeitslosenentschädigung.” https://www.arbeit.swiss/secoalv/en/home/menue/stellensuchende/arbeitslos-was-tun-/faq_arbeitslosenentschaedigung.html
Trade union density in Switzerland is low by international comparison. Due to corporatist integration and the opportunities offered by direct democracy, unions’ political influence may be greater than the density figures suggest. But generally, unions’ power is limited, making them a junior partner in a corporatist system dominated by employers and their organizations (Armingeon 2007, 2011; Mach et al. 2020; Mach/Eichenberger 2022). However, due to the so-called flanking measures of the bilateral agreements with the EU, a large share of jobs are covered by generally applicable collective agreements (erga-omnes-rules) (Oesch 2011). In 2022, about 50% of all jobs were covered by collective agreements, and among these, every second job was covered by a generally applicable collective agreement (FSO 2023).
Social rights within Switzerland are strongly portable. Social policy is mainly regulated at the federal level. The most important social insurance programs – unemployment and pensions (1st pillar) – are federal-level systems, although they are implemented at the regional level. The second pension pillar is run by private pension funds, but assets can be shifted between these funds in the event of a change of employer.
Citations:
Armingeon, Klaus. 1997. “Swiss Corporatism in Comparative Perspective.” West European Politics 20(4): 164-179.
Armingeon, Klaus. 2011. “A Prematurely Announced Death? Swiss Corporatism in Comparative Perspective.” In Switzerland in Europe: Continuity and Change in the Swiss Political Economy, eds. Christine Trampusch and André Mach. London/New York: Routledge.
FSO (Federal Statistical Office, Bundesamt für Statistik). 2023. “Gesamtarbeitsverträge nach Typ, Grösse und Wirtschaftssektor.” https://www.bfs.admin.ch/bfs/en/home/statistics/work-income.assetdetail.28985683.html
Claude Longchamp, Monia Aebersold, Bianca Rousselot, Silvia Ratelband-Pally. 2005. Sans-papiers en Suisse.
c’est le marché de l’emploi qui est déterminant, non pas la politique d’asile. Rapport final sur mandat de l’Office fédéral des migrations, Gfs.Bern.
Mach, André, Frédéric Varone, and Steven Eichenberger. 2020. “Transformations of Swiss Neo-Corporatism: From Pre-Parliamentary Negotiations toward Privileged Pluralism in the Parliamentary Venue.” In The European Social Model under Pressure, eds. Romana Careja, Patrick Emmenegger, and Nathalie Giger. Wiesbaden: Springer Fachmedien Wiesbaden, 51-68.
Mach, André, and Steven Eichenberg. 2022. “Associations d’intérêts.” In Handbuch der Schweizer Politik. 7. Auflage., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger, and Flavia Fossati. Zürich: NZZ Libro, 439-464.
Oesch, Daniel. 2011. “Swiss Trade Unions and Industrial Relations After 1990. A History of Decline and Renewal.” In Switzerland in Europe: Continuity and Change in the Swiss Political Economy, eds. Christine Trampusch and André Mach. London/New York: Routledge, 82-102.
Work.swiss. 2023. “FAQ Arbeitslosenentschädigung.” https://www.arbeit.swiss/secoalv/en/home/menue/stellensuchende/arbeitslos-was-tun-/faq_arbeitslosenentschaedigung.html
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
10
9
9
The tax system is fully aligned with the goals of ensuring adequate tax revenues.
8
7
6
7
6
The tax system is largely aligned with the goals of ensuring adequate tax revenues.
5
4
3
4
3
The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
2
1
1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
The Swiss tax ratio is significantly below the OECD average, and tax rates are moderate particularly for businesses, with a moderately progressive income tax. Hence, from a liberal point of view and in comparative perspective, there are few disincentives in the tax system that may discourage individuals from seeking employment or companies from making investments. One exception may be the tax for married couples (see below).
The overall public revenues ratio (federation, cantons, municipalities) is around 29% of GDP (2021). The federation receives 36% of all public revenues, the cantons 24% and the municipalities 15%. Social insurance programs – which are regulated on the level of the federation – receive 24% of total public revenue (FFA 2022). Public debt is very low, at 16% of GDP (FFA 2023a).
It is important to note that due to the principle of federalism, tax rates can differ substantially between regions, as individual cantons and local communities have the power to set regional tax levels. For example, the tax load for a couple (one bread earner, CHF 100,000 gross income, no children) varied by a factor of 3.5 between the cantonal capital with the lowest tax rate (Zug) and that with the highest tax rate (Neuchâtel) in 2018 (FTA 2023). Therefore, any information on Swiss tax policy should be accompanied by information on which government – municipal, cantonal or federal – is in charge. In the following, we focus on the federal level.
Switzerland’s apparently low levels of government revenue as a percent of GDP can be attributed in part to the way in which the statistics are calculated. Contributions to the occupational pension system (the so-called second pillar) and the health insurance program – which are non-state organizations – are excluded from government revenue calculations. The share of government revenue as a percent of GDP would be about 10 percentage points higher if contributions to these two programs were included. This would bring Switzerland closer to the euro zone average – but even then the Swiss figure would be significantly lower.
Tax policy does not impede competitiveness. Switzerland ranks at the top of competitiveness indexes, and given its low level of taxation, is highly attractive for corporate and personal taxpayers both domestically and internationally. Tax policy has contributed to a balance between revenues and expenditures.
The country’s tax policy has come under scrutiny from the OECD and European Union for treating domestic and some international firms differently at the cantonal level. These international firms have their regional headquarters in Switzerland – employing more than 150,000 people and contributing substantially to tax revenue – but do most of their business abroad.
In response to the scrutiny, the federal government introduced a contentious corporate-taxation reform policy. In the end, in 2017, a quid pro quo was agreed to. To win the support of politicians on the political left, contributions to the first pillar of the pension system (AHV) have been increased by the same amount as taxes are reduced for firms. These additional resources for the AHV are generated through increased contributions from the federal state as well as from increased social security contributions from employers and workers. This compensation deal was accepted by popular vote in May 2019.
Another recent tax reform, prompted by international political pressure from the OECD, involves minimal taxes for large, internationally active corporate groups. These are now supposed to pay at least 15% tax on their profits. These taxes were agreed to in a popular vote in June 2023, and became effective on 1 January 2024.
Given that other countries have lagged behind in the implementation of this OECD standard, Swiss businesses sought to delay the date of implementation, but did not succeed (NZZ 10 November 2023).
Another major tax issue with constitutional implications involves tax rates for married couples, which under certain circumstances may be higher than those paid by unmarried couples. A measure that would have implemented reform on this issue failed by a narrow margin in a 2017 popular vote, possibly as a result of erroneous information provided by the federal government regarding the number of persons affected. An April 2019 ruling by the Federal Supreme Court abrogated the outcome of the 2017 referendum. This marked the first time in Switzerland’s history that a popular vote had been annulled by the Federal Supreme Court. The Federal Council planned to submit a new bill on this issue in March 2024 (FDF 2023b).
Citations:
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2022. Taschenstatistik. Öffentliche Finanzen 2022. Bern: FFA.
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2023. “Federal Debt.” https://www.efd.admin.ch/efd/en/home/fiscal-policy/federal-debt.html
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2023b. “https://www.estv.admin.ch/estv/de/home/die-estv/steuerpolitik/parlamentsgeschaefte/2-15.html”
FTA (Federal Tax Administration, Eidgenössisches Steuerverwaltung) 2023. “Tax burden in Switzerland.” https://www.estv.admin.ch/estv/en/home/fta/tax-statistics/tax-burden-switzerland.html
NZZ. 2023. “Setzt nun ausgerechnet die Schweiz die Mindeststeuer am schnellsten um und gibt damit einen Wettbewerbsvorteil preis?” Neue Zürcher Zeitung, November 10.
The overall public revenues ratio (federation, cantons, municipalities) is around 29% of GDP (2021). The federation receives 36% of all public revenues, the cantons 24% and the municipalities 15%. Social insurance programs – which are regulated on the level of the federation – receive 24% of total public revenue (FFA 2022). Public debt is very low, at 16% of GDP (FFA 2023a).
It is important to note that due to the principle of federalism, tax rates can differ substantially between regions, as individual cantons and local communities have the power to set regional tax levels. For example, the tax load for a couple (one bread earner, CHF 100,000 gross income, no children) varied by a factor of 3.5 between the cantonal capital with the lowest tax rate (Zug) and that with the highest tax rate (Neuchâtel) in 2018 (FTA 2023). Therefore, any information on Swiss tax policy should be accompanied by information on which government – municipal, cantonal or federal – is in charge. In the following, we focus on the federal level.
Switzerland’s apparently low levels of government revenue as a percent of GDP can be attributed in part to the way in which the statistics are calculated. Contributions to the occupational pension system (the so-called second pillar) and the health insurance program – which are non-state organizations – are excluded from government revenue calculations. The share of government revenue as a percent of GDP would be about 10 percentage points higher if contributions to these two programs were included. This would bring Switzerland closer to the euro zone average – but even then the Swiss figure would be significantly lower.
Tax policy does not impede competitiveness. Switzerland ranks at the top of competitiveness indexes, and given its low level of taxation, is highly attractive for corporate and personal taxpayers both domestically and internationally. Tax policy has contributed to a balance between revenues and expenditures.
The country’s tax policy has come under scrutiny from the OECD and European Union for treating domestic and some international firms differently at the cantonal level. These international firms have their regional headquarters in Switzerland – employing more than 150,000 people and contributing substantially to tax revenue – but do most of their business abroad.
In response to the scrutiny, the federal government introduced a contentious corporate-taxation reform policy. In the end, in 2017, a quid pro quo was agreed to. To win the support of politicians on the political left, contributions to the first pillar of the pension system (AHV) have been increased by the same amount as taxes are reduced for firms. These additional resources for the AHV are generated through increased contributions from the federal state as well as from increased social security contributions from employers and workers. This compensation deal was accepted by popular vote in May 2019.
Another recent tax reform, prompted by international political pressure from the OECD, involves minimal taxes for large, internationally active corporate groups. These are now supposed to pay at least 15% tax on their profits. These taxes were agreed to in a popular vote in June 2023, and became effective on 1 January 2024.
Given that other countries have lagged behind in the implementation of this OECD standard, Swiss businesses sought to delay the date of implementation, but did not succeed (NZZ 10 November 2023).
Another major tax issue with constitutional implications involves tax rates for married couples, which under certain circumstances may be higher than those paid by unmarried couples. A measure that would have implemented reform on this issue failed by a narrow margin in a 2017 popular vote, possibly as a result of erroneous information provided by the federal government regarding the number of persons affected. An April 2019 ruling by the Federal Supreme Court abrogated the outcome of the 2017 referendum. This marked the first time in Switzerland’s history that a popular vote had been annulled by the Federal Supreme Court. The Federal Council planned to submit a new bill on this issue in March 2024 (FDF 2023b).
Citations:
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2022. Taschenstatistik. Öffentliche Finanzen 2022. Bern: FFA.
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2023. “Federal Debt.” https://www.efd.admin.ch/efd/en/home/fiscal-policy/federal-debt.html
FFA (Federal Finance Administration; Eidgenössische Finanzverwaltung). 2023b. “https://www.estv.admin.ch/estv/de/home/die-estv/steuerpolitik/parlamentsgeschaefte/2-15.html”
FTA (Federal Tax Administration, Eidgenössisches Steuerverwaltung) 2023. “Tax burden in Switzerland.” https://www.estv.admin.ch/estv/en/home/fta/tax-statistics/tax-burden-switzerland.html
NZZ. 2023. “Setzt nun ausgerechnet die Schweiz die Mindeststeuer am schnellsten um und gibt damit einen Wettbewerbsvorteil preis?” Neue Zürcher Zeitung, November 10.
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
The redistributive effect of taxes (calculated by comparing income inequality before and after taxes and social benefits) is comparatively limited – that is, tax policy does little to correct for market income inequality.
A tax issue with constitutional implications involves tax rates for married couples which, under certain circumstances, may be higher than those of unmarried couples. The Federal Council planned to submit a new bill on this issue in March 2024 (FDF 2023a) (for details see the discussion in P5.1).
Given the available evidence on tax evasion, wage incomes are arguably treated less favorably than income from property (Baselgia 2023). It is much harder to evade taxes on income than taxes on property.
The fact that specific cantons attract certain companies and wealthy foreigners by offering them preferential tax advantages is another instance of differential treatment in tax policy. Although the share of taxpayers that benefit from this rule is very small (less than 0.1% of all taxpayers), it is a contentious political issue that very rich foreigners – who are not gainfully employed in the country – pay very moderate taxes (FDF 2023b).
The bulk of tax revenue goes to cantons and municipalities. Cantons and municipalities decide on their tax rates, and these rates vary widely. Therefore, the fiscal quotas of cantons and municipalities also vary, and by implication, so does their provision of public services (see also P5.1). In the Swiss political discourse – particularly among center-right politicians – this lack of horizontal equity is intentional. In a strongly decentralized political system, citizens decide democratically, frequently in a popular vote, on their local tax rate. Additionally, center-right politicians argue that different tax burdens create competition between local and regional units for attracting firms and individual taxpayers.
A project aimed at imposing micro-taxes on electronic transactions, mainly targeting the finance sector, was unsuccessfully launched by finance professor Marc Cheney of the University of Zurich. Finally, a major reform project – with implications for horizontal equity – concerns the abolition of taxes on owner-occupied rental value. For decades, the Homeowners Association sought to eliminate this tax while retaining as many of the concurrent tax deductions for renovations and debt service as possible. Despite support from some politicians in the political center and on the right, this campaign ultimately failed. Recently, another similar reform attempt has been launched. Caught in a complex web of different political forces – cantonal ministries of finance, the political left, craftsmen in the construction sector, banks and insurance companies that issue mortgages, homeowners, and some center-right politicians – the fate of the reform is not yet clear (FDF 2023c, FFA 2023).
Citations:
Baselgia, Enea. 2023. “The Compliance Effects of the Automatic Exchange of Information: Evidence from the Swiss Tax Amnesty.” EU Tax Observatory Working Paper No. 19. https://www.taxobservatory.eu//www-site/uploads/2023/06/EUTO_WP19_Baselgia_AEOI_Compliance_June2023.pdf
FDF (Federal Department of Finance; Eidgenössisches Finanzdempartement) 2023a. https://www.efd.admin.ch/efd/de/home/steuern/steuern-national/reform-der-ehe–und-familienbesteuerung.html
FDF (Federal Department of Finance; Eidgenössisches Finanzdempartement) 2023b. “https://www.efd.admin.ch/efd/en/home/taxes/national-taxation/lump-sum-taxation.html”
FDF. 2023c. https://www.efd.admin.ch/efd/de/home/steuern/steuern-national/wohneigentumsbesteuerung.html
A tax issue with constitutional implications involves tax rates for married couples which, under certain circumstances, may be higher than those of unmarried couples. The Federal Council planned to submit a new bill on this issue in March 2024 (FDF 2023a) (for details see the discussion in P5.1).
Given the available evidence on tax evasion, wage incomes are arguably treated less favorably than income from property (Baselgia 2023). It is much harder to evade taxes on income than taxes on property.
The fact that specific cantons attract certain companies and wealthy foreigners by offering them preferential tax advantages is another instance of differential treatment in tax policy. Although the share of taxpayers that benefit from this rule is very small (less than 0.1% of all taxpayers), it is a contentious political issue that very rich foreigners – who are not gainfully employed in the country – pay very moderate taxes (FDF 2023b).
The bulk of tax revenue goes to cantons and municipalities. Cantons and municipalities decide on their tax rates, and these rates vary widely. Therefore, the fiscal quotas of cantons and municipalities also vary, and by implication, so does their provision of public services (see also P5.1). In the Swiss political discourse – particularly among center-right politicians – this lack of horizontal equity is intentional. In a strongly decentralized political system, citizens decide democratically, frequently in a popular vote, on their local tax rate. Additionally, center-right politicians argue that different tax burdens create competition between local and regional units for attracting firms and individual taxpayers.
A project aimed at imposing micro-taxes on electronic transactions, mainly targeting the finance sector, was unsuccessfully launched by finance professor Marc Cheney of the University of Zurich. Finally, a major reform project – with implications for horizontal equity – concerns the abolition of taxes on owner-occupied rental value. For decades, the Homeowners Association sought to eliminate this tax while retaining as many of the concurrent tax deductions for renovations and debt service as possible. Despite support from some politicians in the political center and on the right, this campaign ultimately failed. Recently, another similar reform attempt has been launched. Caught in a complex web of different political forces – cantonal ministries of finance, the political left, craftsmen in the construction sector, banks and insurance companies that issue mortgages, homeowners, and some center-right politicians – the fate of the reform is not yet clear (FDF 2023c, FFA 2023).
Citations:
Baselgia, Enea. 2023. “The Compliance Effects of the Automatic Exchange of Information: Evidence from the Swiss Tax Amnesty.” EU Tax Observatory Working Paper No. 19. https://www.taxobservatory.eu//www-site/uploads/2023/06/EUTO_WP19_Baselgia_AEOI_Compliance_June2023.pdf
FDF (Federal Department of Finance; Eidgenössisches Finanzdempartement) 2023a. https://www.efd.admin.ch/efd/de/home/steuern/steuern-national/reform-der-ehe–und-familienbesteuerung.html
FDF (Federal Department of Finance; Eidgenössisches Finanzdempartement) 2023b. “https://www.efd.admin.ch/efd/en/home/taxes/national-taxation/lump-sum-taxation.html”
FDF. 2023c. https://www.efd.admin.ch/efd/de/home/steuern/steuern-national/wohneigentumsbesteuerung.html
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
Apart from flat tax regulations (in the canton of Obwalden), tax rules are considered difficult by many taxpayers. Arguably, comparing German and Swiss rules, Swiss rules may in general be more transparent and comprehensible, and tax forms are relatively easy to fill out without the support of a tax counselor. This conclusion is confirmed by indicators such as the “ease of paying taxes” by the World Bank. For example, taxpayers are calculated to have spent 15 hours doing corporate income taxes in 2020, 40 hours for labor taxation and eight hours for VAT – compare this with a respective 41 hours, 134 hours and 43 hours in Germany (pwc n.d.).
Citations:
pwc. n.d. “Interactive tax data explorer.” https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/explorer-tool.html
Citations:
pwc. n.d. “Interactive tax data explorer.” https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/explorer-tool.html
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
Corresponding to the general liberal-conservative approach of Swiss tax policy, taxes do little to internalize externalities. The rejection of a comprehensive CO2 law in 2017 in a popular vote supports this observation. This law would have internalized negative externalities. After the popular vote, the federal government proposed a new law in December 2021, substantially watering down the failed CO2 law and renouncing any new attempts to tax CO2 emissions. Rather, this new measure relies almost entirely on positive incentives, and any attempts to increase the price of gasoline by additional taxes have been opposed vehemently in the political process.
However, there are also examples of tax policy that incentivizes environmental protection. A CO2 levy on fossil fuels has existed since 2008. Two-thirds of its revenue is redistributed to the population and the economy. For citizens, this redistribution is administered via a reduction of health insurance premiums. Similarly, there has been a tax on volatile organic compounds – for instance, those present in solvents and those responsible for ozone pollution – since 2000 (OFEV n.d.); once again, the benefits are redistributed to the population through the health insurance system. Evidently, these initiatives are far from enough to foster a general dissuasive dynamic regarding environmentally harmful behavior.
Citations:
OFEV: https://www.bafu.admin.ch/bafu/fr/home/themes/air/info-specialistes/mesures-de-protection-de-l-air/taxe-d_incitation-sur-les-cov.html
However, there are also examples of tax policy that incentivizes environmental protection. A CO2 levy on fossil fuels has existed since 2008. Two-thirds of its revenue is redistributed to the population and the economy. For citizens, this redistribution is administered via a reduction of health insurance premiums. Similarly, there has been a tax on volatile organic compounds – for instance, those present in solvents and those responsible for ozone pollution – since 2000 (OFEV n.d.); once again, the benefits are redistributed to the population through the health insurance system. Evidently, these initiatives are far from enough to foster a general dissuasive dynamic regarding environmentally harmful behavior.
Citations:
OFEV: https://www.bafu.admin.ch/bafu/fr/home/themes/air/info-specialistes/mesures-de-protection-de-l-air/taxe-d_incitation-sur-les-cov.html
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
10
9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Budgetary policy in Switzerland is fiscally sustainable. There have been no budget deficits at the federal level since 2008, with the exception of the 2020 – 2022 period due to COVID-19. Between 1990 was 2008, the largest annual deficit was -1.9% in 1993. For the period through 2027, the federal deficit is planned to be between -0.3% and 0% (FFA 2023). Since the federal budget has usually been too conservative in previous years, there is no reason to expect a major deficit in the coming years. However, the federal finance minister points to predictable expenditures in the near future – including on the long-term effects of the pandemic, the military, pensions and support for refugees from Ukraine – that could overstretch the federal budget (NZZ 2023 12 28). General public debt amounts to around 28% of GDP (2022, according to Maastricht criteria); the federal debt alone totals about 16% of GDP. It must be noted that the Swiss federal state is very slim by international comparison. Only around one-third of state expenditure is spent by the federal government.
This high level of fiscal sustainability is mainly due to the political decision to have a low tax load and a lean state. In addition, keeping the public deficit and debt low has been a major concern of almost all politicians at all levels of the political system. Various rules and structures have been developed to avoid the dynamics of expanding budgets.
For example, on the federal level, there is the constitutional debt brake (Article 126): “The maximum of the total expenditures which may be budgeted shall be determined by the expected receipts, taking into account the economic situation.” Direct democracy offers another effective means of keeping the budget within limits. In popular votes, people have proven reluctant – compared in particular to members of parliaments when elections are drawing near – to support the expansion of state tasks with a corresponding rise in taxes and/or public debt.
Despite the country’s very favorable fiscal position, which allows for some fiscal leeway, the Federal Council pursues a very prudent fiscal policy. Even considering that some individual cantonal and municipal governments pursue unsustainable budgetary policies, the total (i.e., general government) budgetary policy achievement arguably places Switzerland in the OECD’s top group in terms of fiscally sustainable national policies. In its recent country surveys, the OECD praised Switzerland’s budgetary policy, but it also notes that, in the past, authorities tended to skew policy in ways tighter than intended. It suggests making greater use of available fiscal leverage to, inter alia, improve economic and social outcomes (OECD 2019: 34-35, OECD 2022a: 27-36).
Switzerland issues SDG-related action plans on a regular basis (e.g., 2030 Sustainable Development Strategy). The national strategy encourages federal agencies to “incorporate the requirements of the 2030 SDS into their regular budget” (Swiss Federal Council 2021). As the strategy is mostly programmatic and nonbinding, Switzerland has so far only achieved 31 out of 121 SDG targets (OECD 2022b).
The political conflict about fiscal rules such as so-called debt brakes concerns whether deficit-financed counter-cyclical policy and investment in infrastructure may be more advantageous to the economy in the medium and long term, or whether strict adherence to debt brake rules may pay off in the future since – based on experience – debts will otherwise be unlikely to be reduced in the future. Given the extremely favorable development of Switzerland’s public finances, the threat posed by the counter-intentional effects of frugal fiscal policies seems to be greater than the threat of strong increases in public debt. However, this depends very much on political views. The dominant view within the Swiss political elite is clearly conservative-liberal and emphasizes the benefits of frugal policies – except for generous subsidies to agriculture and very pragmatic and interest-driven state intervention in the economy. This heterodox fiscal and economic policy within the framework of a conservative-liberal basic approach to state intervention has been a characteristic of Swiss economic policy for many decades (Gruner 1964; Emmenegger 2022).
The federal government presents its budget to parliament on an annual basis. It also develops financial plans for the legislative term – that is, four years in advance. The process is very transparent; the relevant documents and data are accessible via the government’s webpage (FFA 2023). The current budget (2020 – 2024) is presented on about 450 pages in two volumes. The second volume of the budget contains information on how the government aims to acheive sustainable developments in various policy fields (FFA 2023).
Citations:
Emmenegger, Patrick. 2022. “Wirtschafts- und Finanzpolitik.” In Handbuch der Schweizer Politik. 7. Auflage., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger and Flavia Fossati. Zürich: NZZ Libro, 731-756
FFA (Federal Finance Administration, Eidg. Finanzverwaltung) 2023. https://www.data.finance.admin.ch/superset/dashboard/bundeshaushalt/ and https://www.efv.admin.ch/efv/de/home/finanzberichterstattung/finanzberichte/budget.html and https://www.efv.admin.ch/efv/en/home/finanzberichterstattung/finanzberichte/grundlagen.html
Gruner, Erich. 1964. “100 Jahre Wirtschaftspolitik. Etappen des Interventionismus in der Schweiz.” Schweizerische Zeitschrift für Volkswirtschaft und Statistik 100(1): 3-70.
NZZ (Neue Zürcher Zeitung). 2023. “Jeder Gemeindehaushalt ist flexibler als der des Bundes.” December 28.
OECD. 2019. Economic Survey Switzerland. Paris: OECD.
OECD. 2022a. Economic Survey Switzerland. Paris: OECD.
OECD. 2022b. “Measuring Distance to the SDG Targets – Switzerland.” https://www.oecd.org/wise/measuring-distance-to-the-SDG-targets-country-profile-Switzerland.pdf
Swiss Federal Council. 2021. “2030 Sustainable Development Strategy.” Bern, June 23. file:///Users/cmavrot/Dropbox/Mac/Downloads/sne2030.pdf
This high level of fiscal sustainability is mainly due to the political decision to have a low tax load and a lean state. In addition, keeping the public deficit and debt low has been a major concern of almost all politicians at all levels of the political system. Various rules and structures have been developed to avoid the dynamics of expanding budgets.
For example, on the federal level, there is the constitutional debt brake (Article 126): “The maximum of the total expenditures which may be budgeted shall be determined by the expected receipts, taking into account the economic situation.” Direct democracy offers another effective means of keeping the budget within limits. In popular votes, people have proven reluctant – compared in particular to members of parliaments when elections are drawing near – to support the expansion of state tasks with a corresponding rise in taxes and/or public debt.
Despite the country’s very favorable fiscal position, which allows for some fiscal leeway, the Federal Council pursues a very prudent fiscal policy. Even considering that some individual cantonal and municipal governments pursue unsustainable budgetary policies, the total (i.e., general government) budgetary policy achievement arguably places Switzerland in the OECD’s top group in terms of fiscally sustainable national policies. In its recent country surveys, the OECD praised Switzerland’s budgetary policy, but it also notes that, in the past, authorities tended to skew policy in ways tighter than intended. It suggests making greater use of available fiscal leverage to, inter alia, improve economic and social outcomes (OECD 2019: 34-35, OECD 2022a: 27-36).
Switzerland issues SDG-related action plans on a regular basis (e.g., 2030 Sustainable Development Strategy). The national strategy encourages federal agencies to “incorporate the requirements of the 2030 SDS into their regular budget” (Swiss Federal Council 2021). As the strategy is mostly programmatic and nonbinding, Switzerland has so far only achieved 31 out of 121 SDG targets (OECD 2022b).
The political conflict about fiscal rules such as so-called debt brakes concerns whether deficit-financed counter-cyclical policy and investment in infrastructure may be more advantageous to the economy in the medium and long term, or whether strict adherence to debt brake rules may pay off in the future since – based on experience – debts will otherwise be unlikely to be reduced in the future. Given the extremely favorable development of Switzerland’s public finances, the threat posed by the counter-intentional effects of frugal fiscal policies seems to be greater than the threat of strong increases in public debt. However, this depends very much on political views. The dominant view within the Swiss political elite is clearly conservative-liberal and emphasizes the benefits of frugal policies – except for generous subsidies to agriculture and very pragmatic and interest-driven state intervention in the economy. This heterodox fiscal and economic policy within the framework of a conservative-liberal basic approach to state intervention has been a characteristic of Swiss economic policy for many decades (Gruner 1964; Emmenegger 2022).
The federal government presents its budget to parliament on an annual basis. It also develops financial plans for the legislative term – that is, four years in advance. The process is very transparent; the relevant documents and data are accessible via the government’s webpage (FFA 2023). The current budget (2020 – 2024) is presented on about 450 pages in two volumes. The second volume of the budget contains information on how the government aims to acheive sustainable developments in various policy fields (FFA 2023).
Citations:
Emmenegger, Patrick. 2022. “Wirtschafts- und Finanzpolitik.” In Handbuch der Schweizer Politik. 7. Auflage., eds. Yannis Papadopoulos, Pascal Sciarini, Adrian Vatter, Silja Häusermann, Patrick Emmenegger and Flavia Fossati. Zürich: NZZ Libro, 731-756
FFA (Federal Finance Administration, Eidg. Finanzverwaltung) 2023. https://www.data.finance.admin.ch/superset/dashboard/bundeshaushalt/ and https://www.efv.admin.ch/efv/de/home/finanzberichterstattung/finanzberichte/budget.html and https://www.efv.admin.ch/efv/en/home/finanzberichterstattung/finanzberichte/grundlagen.html
Gruner, Erich. 1964. “100 Jahre Wirtschaftspolitik. Etappen des Interventionismus in der Schweiz.” Schweizerische Zeitschrift für Volkswirtschaft und Statistik 100(1): 3-70.
NZZ (Neue Zürcher Zeitung). 2023. “Jeder Gemeindehaushalt ist flexibler als der des Bundes.” December 28.
OECD. 2019. Economic Survey Switzerland. Paris: OECD.
OECD. 2022a. Economic Survey Switzerland. Paris: OECD.
OECD. 2022b. “Measuring Distance to the SDG Targets – Switzerland.” https://www.oecd.org/wise/measuring-distance-to-the-SDG-targets-country-profile-Switzerland.pdf
Swiss Federal Council. 2021. “2030 Sustainable Development Strategy.” Bern, June 23. file:///Users/cmavrot/Dropbox/Mac/Downloads/sne2030.pdf
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
8
7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
Switzerland’s achievement in terms of innovation is considerable. It spends 3.4% of GDP (2021) on research and development, placing it among the world’s top spenders on R&D, comparable to the U.S., Sweden, Austria and Germany, and clearly ahead of the EU average of 2.1% (2021; OECD 2023; FSO 2021). Switzerland is ranked among the five leading nations in terms of innovation (Foray 2022).
Sixty-eight percent of research spending is corporate spending with the direct aim of economic innovation, an important factor in the country’s strong overall competitiveness. With a share of about 29%, public research funding plays a lesser role than in other European countries. The R&D system depends on six main actors: the universities of applied sciences, the cantonal universities, the two federal institutes of technology, the National Science Foundation, the Federal Commission for Technology and Innovation, and the academies of sciences. These actors are independent of each other but cooperate based on complementarity and (limited) competition. The various institutions are highly autonomous, and research policies and processes are driven by bottom-up operations.
Thus, Swiss research policy is not centralized, but rather relies on a concept of decentralized innovation with periodic intervention by the federal government. The output of the research system is impressive. The federal institutes of technology in Zurich and Lausanne number among the top-ranked universities in the world, and the universities of Basel, Bern, Geneva and Zurich regularly appear on the list of the 150 best universities worldwide.
Given this decentralized structure of research and innovation; a university system which is based on the cantons – with the exception of the two federal institutes of technology – and a strong reliance on privately financed R&D, the role of the federal government in utilizing research and innovation as drivers for the transition to a sustainable economy and society is very limited. Every four years, it submits a document to the national parliament detailing its requests for public funding of R&D and stating its goals. It claims to contribute “to sustainable development and equal opportunities in all areas. In this way, it also contributes to the implementation of the 2030 Agenda and thus supports the development of the 2030 Sustainable Development Strategy” (Federal Council 2020).
Basically, an observer’s own political views will affect judgments of whether a sustainable economy and society requires a clear commitment and strategy on the part of the central government, or whether sustainability may be best served by a decentralized and competitive approach. The latter stance would probably correspond to the views of a large share of the Swiss political elite.
A major problem for Swiss R&D is exclusion from EU research funding and researchers’ limited access, as external partners financed by Swiss institutions, to these EU programs (Baschung and Leresche 2023). This has been due to stalled negotiations that have undermined the relationship since May 2021. At the time of writing, some rapprochement between the EU and Switzerland appeared evident, which may mitigate these problems in the foreseeable future.
Citations:
Baschung, Lukas, and Jean-Philippe Leresche. 2023. “Research, Technology, and Innovation Policies.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 623–641. https://doi.org/10.1093/oxfordhb/9780192871787.013.32.
Federal Council (Bundesrat). 2020. “Botschaft zur Förderung von Bildung, Forschung und Innovation in den Jahren 2021–2024.” BBI 2020-3681.
FSO (Federal Statistical Office; Bundesamt für Statistik). 2023. “Forschung und Entwicklung.” https://www.bfs.admin.ch/bfs/de/home/statistiken/volkswirtschaft/forschung-entwicklung.html
Foray, Dominique. 2022. “Rückläufige F&E in der Schweiz: Ein Paradox?” Die Volkswirtschaft, June 13.
OECD. 2023. “OECD Main Science and Technology Indicators.”
Highlights of the September 2023 edition. 2023. OECD. Paris: https://www.oecd.org/innovation/inno/msti2023sept.pdf
Sixty-eight percent of research spending is corporate spending with the direct aim of economic innovation, an important factor in the country’s strong overall competitiveness. With a share of about 29%, public research funding plays a lesser role than in other European countries. The R&D system depends on six main actors: the universities of applied sciences, the cantonal universities, the two federal institutes of technology, the National Science Foundation, the Federal Commission for Technology and Innovation, and the academies of sciences. These actors are independent of each other but cooperate based on complementarity and (limited) competition. The various institutions are highly autonomous, and research policies and processes are driven by bottom-up operations.
Thus, Swiss research policy is not centralized, but rather relies on a concept of decentralized innovation with periodic intervention by the federal government. The output of the research system is impressive. The federal institutes of technology in Zurich and Lausanne number among the top-ranked universities in the world, and the universities of Basel, Bern, Geneva and Zurich regularly appear on the list of the 150 best universities worldwide.
Given this decentralized structure of research and innovation; a university system which is based on the cantons – with the exception of the two federal institutes of technology – and a strong reliance on privately financed R&D, the role of the federal government in utilizing research and innovation as drivers for the transition to a sustainable economy and society is very limited. Every four years, it submits a document to the national parliament detailing its requests for public funding of R&D and stating its goals. It claims to contribute “to sustainable development and equal opportunities in all areas. In this way, it also contributes to the implementation of the 2030 Agenda and thus supports the development of the 2030 Sustainable Development Strategy” (Federal Council 2020).
Basically, an observer’s own political views will affect judgments of whether a sustainable economy and society requires a clear commitment and strategy on the part of the central government, or whether sustainability may be best served by a decentralized and competitive approach. The latter stance would probably correspond to the views of a large share of the Swiss political elite.
A major problem for Swiss R&D is exclusion from EU research funding and researchers’ limited access, as external partners financed by Swiss institutions, to these EU programs (Baschung and Leresche 2023). This has been due to stalled negotiations that have undermined the relationship since May 2021. At the time of writing, some rapprochement between the EU and Switzerland appeared evident, which may mitigate these problems in the foreseeable future.
Citations:
Baschung, Lukas, and Jean-Philippe Leresche. 2023. “Research, Technology, and Innovation Policies.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 623–641. https://doi.org/10.1093/oxfordhb/9780192871787.013.32.
Federal Council (Bundesrat). 2020. “Botschaft zur Förderung von Bildung, Forschung und Innovation in den Jahren 2021–2024.” BBI 2020-3681.
FSO (Federal Statistical Office; Bundesamt für Statistik). 2023. “Forschung und Entwicklung.” https://www.bfs.admin.ch/bfs/de/home/statistiken/volkswirtschaft/forschung-entwicklung.html
Foray, Dominique. 2022. “Rückläufige F&E in der Schweiz: Ein Paradox?” Die Volkswirtschaft, June 13.
OECD. 2023. “OECD Main Science and Technology Indicators.”
Highlights of the September 2023 edition. 2023. OECD. Paris: https://www.oecd.org/innovation/inno/msti2023sept.pdf
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
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6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
Switzerland is one of the world’s most significant financial markets. The major Swiss bank UBS is a global financial player. The post-2007 global crisis and the economic problems of UBS in Switzerland – which forced the Swiss government to intervene massively to avoid the bankruptcy of this major bank in 2008 – triggered banking reforms, introducing measures to deal with the problem of banks being “too big to fail.” Action was taken swiftly by the competent authorities, but lacked democratic transparency (Hirschi et al. 2022). Though it remained unclear whether these new rules and institutions would be sufficient in the event of a major crisis, the Swiss approach numbers among the most sound and prudent systems of regulation worldwide. However, this reform could not prevent a further major banking crisis in 2023, when Credit Suisse experienced a serious crisis of trust. Once again, the government actively and successfully intervened in the crisis, and motivated and even pressured the remaining large bank, UBS, to integrate the quickly eroding Credit Suisse into UBS. The government supported this in part by providing guarantees to UBS in case of substantial problems in the takeover. Fortunately, these resources were not needed in the end (FDF 2023b).
The federal government, bankers and international organizations such as the OECD (OECD 2019) assert that Swiss private and public actors have been active on the global level in reforming the international banking system, in particular in interaction with regulatory bodies in the United Kingdom, United States and European Union. In this regard, the government has credibly implemented international agreements to prevent and combat high-risk financial activities that pose systemic risks.
Switzerland has proved very active in regulating new financial technologies, particularly in the case of distributed-ledger technologies. In September 2020, parliament passed the distributed-ledger technology (DLT) blanket act, which selectively adapts 10 existing federal laws. In June 2021, the Federal Council brought the Federal Act on the Adaptation of Federal Law to Developments in Distributed Electronic Register Technology into full force. This will allow for innovative DLT trading facilities and increase legal certainty in the event of bankruptcy (Federal Council 2021).
In 2014, the Swiss government supported the OECD declaration on the automatic exchange of information in tax matters (OECD 2014), making the automatic exchange of information effective by 2017. This considerably modified Swiss banking secrecy – which had been rightly criticized for many years as a major element of international tax havens. In this case, rather than actively pursuing a strategy of transparency and avoidance of policies allowing it to become a tax haven, Switzerland simply reacted and bowed to massive international pressure (Gava 2023). Likewise, the OECD minimum tax for large international enterprises – abolishing tax havens in certain cantons – was reluctantly accepted by political elites and by the people in a popular vote in 2023. The major motivation for this retrenchment of regulatory havens has not been the desire for fairness and transparency. Rather, the main reason why even staunch supporters of Swiss sovereignty in tax matters agreed with the reform was the following: “If Switzerland were to refrain from introducing the minimum tax rate, the Swiss arms of corporate groups from these jurisdictions would be taxed more heavily by their parent country, which would lead to base erosion in favor of other countries” (FDF 2023a). Finally, in the 2023 AML Index of the Basel Institute on Governance assessing risks of money laundering and terrorist financing, Switzerland ranks only at the 16th place out of 34 European countries.
Citations:
Basel Institute on Governance. 2023. “Basel AML Index 2023: 12th Public Edition – Ranking Money Laundering and Terrorist Financing Risks Around the World.” Available at: index.baselgovernance.org
Federal Department of Finance, Eidg. Finanzdepartement. 2023. “Implementation of the OECD Minimum Tax Rate in Switzerland.” https://www.efd.admin.ch/efd/en/home/taxes/international-taxation/implementation-oecd-minimum-tax-rate.html#-41243966
Federal Department of Finance, Eidg. Finanzdepartement. 2023. “UBS takeover of Credit Suisse.” https://www.efd.admin.ch/efd/en/home/financial-affairs/ubs-takeover-credit-suisse%20.html
Federal Council. 2021. “Federal Council Brings DLT Act Fully into Force and Issues Ordinance.” https://www.sif.admin.ch/sif/en/home/documentation/press-releases/medienmitteilungen.msg-id-84035.html
Gava, Roy. 2023. “Banking and the Swiss Financial Centre.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 563–584. https://doi.org/10.1093/oxfordhb/9780192871787.013.29
Hirschi, Caspar, Johanna Hornung, Dylan Jaton, Céline Mavrot, Fritz Sager, and Caroline Schlaufer. 2022. Wissenschaftliche Politikberatung in Krisenzeiten in der Schweiz: Eine Analyse der Finanzkrise, des Fukushima-Unfalls und der Covid-19-Pandemie. Study commissioned by the Swiss Science Council. Universities of Bern, Lausanne, St. Gallen.
OECD. 2014. “Declaration on Automatic Exchange of Information in Tax Matters.” Adopted on May 6. https://www.oecd.org/mcm/MCM-2014-Declaration-Tax.pdf
OECD. 2019. Economic Surveys. Switzerland, November 2019. Paris: OECD.
The federal government, bankers and international organizations such as the OECD (OECD 2019) assert that Swiss private and public actors have been active on the global level in reforming the international banking system, in particular in interaction with regulatory bodies in the United Kingdom, United States and European Union. In this regard, the government has credibly implemented international agreements to prevent and combat high-risk financial activities that pose systemic risks.
Switzerland has proved very active in regulating new financial technologies, particularly in the case of distributed-ledger technologies. In September 2020, parliament passed the distributed-ledger technology (DLT) blanket act, which selectively adapts 10 existing federal laws. In June 2021, the Federal Council brought the Federal Act on the Adaptation of Federal Law to Developments in Distributed Electronic Register Technology into full force. This will allow for innovative DLT trading facilities and increase legal certainty in the event of bankruptcy (Federal Council 2021).
In 2014, the Swiss government supported the OECD declaration on the automatic exchange of information in tax matters (OECD 2014), making the automatic exchange of information effective by 2017. This considerably modified Swiss banking secrecy – which had been rightly criticized for many years as a major element of international tax havens. In this case, rather than actively pursuing a strategy of transparency and avoidance of policies allowing it to become a tax haven, Switzerland simply reacted and bowed to massive international pressure (Gava 2023). Likewise, the OECD minimum tax for large international enterprises – abolishing tax havens in certain cantons – was reluctantly accepted by political elites and by the people in a popular vote in 2023. The major motivation for this retrenchment of regulatory havens has not been the desire for fairness and transparency. Rather, the main reason why even staunch supporters of Swiss sovereignty in tax matters agreed with the reform was the following: “If Switzerland were to refrain from introducing the minimum tax rate, the Swiss arms of corporate groups from these jurisdictions would be taxed more heavily by their parent country, which would lead to base erosion in favor of other countries” (FDF 2023a). Finally, in the 2023 AML Index of the Basel Institute on Governance assessing risks of money laundering and terrorist financing, Switzerland ranks only at the 16th place out of 34 European countries.
Citations:
Basel Institute on Governance. 2023. “Basel AML Index 2023: 12th Public Edition – Ranking Money Laundering and Terrorist Financing Risks Around the World.” Available at: index.baselgovernance.org
Federal Department of Finance, Eidg. Finanzdepartement. 2023. “Implementation of the OECD Minimum Tax Rate in Switzerland.” https://www.efd.admin.ch/efd/en/home/taxes/international-taxation/implementation-oecd-minimum-tax-rate.html#-41243966
Federal Department of Finance, Eidg. Finanzdepartement. 2023. “UBS takeover of Credit Suisse.” https://www.efd.admin.ch/efd/en/home/financial-affairs/ubs-takeover-credit-suisse%20.html
Federal Council. 2021. “Federal Council Brings DLT Act Fully into Force and Issues Ordinance.” https://www.sif.admin.ch/sif/en/home/documentation/press-releases/medienmitteilungen.msg-id-84035.html
Gava, Roy. 2023. “Banking and the Swiss Financial Centre.” In The Oxford Handbook of Swiss Politics, eds. Patrick Emmenegger, Flavia Fossati, Silja Häusermann, Yannis Papadopoulos, Pascal Sciarini, and Adrian Vatter. Oxford: Oxford University Press, 563–584. https://doi.org/10.1093/oxfordhb/9780192871787.013.29
Hirschi, Caspar, Johanna Hornung, Dylan Jaton, Céline Mavrot, Fritz Sager, and Caroline Schlaufer. 2022. Wissenschaftliche Politikberatung in Krisenzeiten in der Schweiz: Eine Analyse der Finanzkrise, des Fukushima-Unfalls und der Covid-19-Pandemie. Study commissioned by the Swiss Science Council. Universities of Bern, Lausanne, St. Gallen.
OECD. 2014. “Declaration on Automatic Exchange of Information in Tax Matters.” Adopted on May 6. https://www.oecd.org/mcm/MCM-2014-Declaration-Tax.pdf
OECD. 2019. Economic Surveys. Switzerland, November 2019. Paris: OECD.