The tax burden in Switzerland is low in international comparison, largely reflecting the substantial non-tax
compulsory contributions towards the health and pension systems which are managed by private
institutions. Taxation of personal income and labour earnings is relatively high, whereas the taxation of
consumption is low. Empirical research on OECD economies and on Switzerland specifically indicates that
shifting taxation away from personal income towards the taxation of consumption would strengthen
incentives to engage in economic activity. The structure of the corporate tax burden could be improved to
remove disincentives for small firms to grow. Reducing the generous provisions which allow interest
payments to be deducted from taxable personal income would reduce incentives for households to
excessively leverage their wealth, with benefits both for financial stability and equity in the tax system.
While tax competition among sub-national authorities has reinforced fiscal discipline, adverse side effects
on equity could be reduced, including through greater reliance on real estate taxation in municipalities.
This Working Paper relates to the 2012 OECD Economic Survey of Switzerland
(www.oecd.org/eco/surveys/switzerland).
