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Bombardier has 900 employees in Switzerland, up from 750 a decade ago. Here a tram drives through Paradeplatz Square in Zurich. The country has emerged as one of the company’s most important R&D sites as it tries to solidify its position as the European train market leader. (Arnd Wiegmann//REUTERS)
Bombardier has 900 employees in Switzerland, up from 750 a decade ago. Here a tram drives through Paradeplatz Square in Zurich. The country has emerged as one of the company’s most important R&D sites as it tries to solidify its position as the European train market leader. (Arnd Wiegmann//REUTERS)

Transportation

Why Bombardier is right at home in Switzerland Add to ...

Switzerland is an odd tax duck. The federal government funds itself mainly through indirect taxation, such as consumption taxes. The cantons, which provide most of the public services, rely on income and property taxes. According to a 2009 report on corporate relocations by the Zurich office of Arthur D. Little, the cantons that have been most successful at attracting head offices are Zurich and Zug, in the German-speaking north, and Geneva, Vaud and Fribourg in the French-speaking west. The report said that about 60 per cent of all the headquarters in Switzerland can be found in those five cantons.

While the average canton corporate tax rate is 19 per cent, some have rock-bottom rates in an attempt to compete not just with the other cantons, but with tax havens such as Montenegro and Ireland. The canton of Obwalden, with a 12.7 per cent rate, has the lowest rate in Switzerland (though remarkably few head offices, since low taxes are not the only lure).

Cantons also have the right to negotiate tax privileges, such as tax holidays. Taxes are not universally low within the cantons. Some of the cantons known for low corporate rates impose high personal taxes on the wealthy, and vice versa. A 2012 Credit Suisse report says that, historically, the German-speaking cantons have been the most competitive on the tax front. But that is changing, with the French-speaking cantons getting into the game.

In spite of the competitive tax cutting, Credit Suisse says that most of the cantons are running balanced budgets. Take that, euro zone, where gaping budget deficits are the norm.

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