International Competition: Zurich Leading in Europe


In a comparison of the tax burden on firms in eight different European economic centres the city of Zurich has come out on top.

Compared to Geneva, Strasbourg, Amsterdam and London, as well as financial centres in southern Germany, Zurich proved to be the city with the lowest taxes for firms. The Swiss cantons neighbouring Zurich even exhibit a slightly lower effective tax burden on companies, while the tax burden in cities in Baden in Southwest Germany was considerably higher. These are the findings of a study carried out by the Centre for European Economic Research (ZEW), Mannheim, on behalf of the International Benchmark forum set up by BAK Basel Economics AG.

For a financial centre like Zurich, however, by far the most important investments are those in the service sector. For this reason ZEW investigated the tax burden for a typical service provider. In Zurich and the surrounding areas, as well as in other European economic centres, service providers are subject to considerably lower taxation than companies in the manufacturing sector, though companies in this sector still pay the least tax in Zurich compared to other cities.

Differences between the effective tax rates in the economic centres considered in the study can be attributed to two principal underlying causes. The Swiss regions have the advantage over other areas due largely to Switzerland's low income tax rates compared to other countries. Ordering the other individual cities by effective tax burden strongly reflects the order of the respective income tax rate tariffs. Furthermore, in a number of countries, in particular in France, non-income taxes have a significant role to play.

"Location Study", one of the teams appointed by the Swiss Federal Tax Administration, has suggested abolishing capital tax at the corporate level. Another suggestion is to scrap private property tax for shareholders with major holdings and instead introduced a single shareholder-relief system for dividends and capital gains for the purpose of income taxation. Calculations for Zurich show, for example, that implementing these measures would reduce the effective tax burden on companies from 13.80 per cent to 11.93 per cent. In the case of major holdings, the reform would only lead to a moderate overall decrease from 44.76 per cent to 42.90 per cent. If there are no major holdings, this amounts to an overall decrease in the effective tax rate from 44.76 to 43.02 per cent.


Prof. Dr. Robert Schwager, Phone: (+49) 0621/1235-215, E-mail:

Dr. Gerd Gutekunst, E-Mail: