Switzerland: new report rates Zug top for “locational quality”

A Credit Suisse study on “Locational Quality of the Swiss Cantons and Regions” launched September 25th finds that “The highest locational quality is exhibited by the Canton of Zug, followed by Zurich.”

The study looks at 7 factors including tax rates, accessibility, availability of well-qualified personnel, and ease of access to airports, and then aggregates them into a “Locational Quality Indicator” to rank the Swiss cantons.

On closer inspection, however, the Credit Suisse “locational quality” model turns out to be rather tax-centric:

– “Tax-sensitive companies and private individuals systematically seek out low-tax regions.”

– “An individual improvement – such as a tax cut by a canton – therefore leads to a relative decline in the locational quality of the other regions.”

– “Detailed analysis of the various partial indicators produces fascinating findings. For instance, it brings to light the rapid rise of Lucerne in terms of tax competitiveness.”

Even when “locational quality” doesn´t correlate with economic growth, this discrepancy is explained by…additional tax breaks:

“The Lake Geneva region has in recent years seen high economic and population growth by Swiss standards, although this is not indicated by its locational quality. One reason is the extensive use of individual tax incentives…These include the privileged tax status of special companies, individual company tax breaks under the «Lex Bonny», lump-sum taxation, and other cantonal measures.”

I particularly enjoyed this introductory paragraph which sets out what could be called the Credit Suisse theory of development and democracy:

“Governments promise their voters prosperity. This objective lies at the heart of all government  programs in democracies, and Switzerland is no exception. For instance, the latest crisis period showed that climate targets, for instance, take a back seat as soon as prosperity can no longer be guaranteed. The question is, though: How can prosperity and added value be achieved or increased? The consensus view is that overall economic conditions play a vital role, because prosperity is always based on added value that was generated previously. Therefore, in order to increase their chances of re-election, governments – or the members of a consensus government – have every incentive to seek to optimize the overall conditions.”

According to wikipedia there are 24.300 companies registered in Zug (population 116.000).  The locational quality study is available here (the site asks to select country of residence from a menu before downloading).

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