The cantons are vying for the best spots in the locational rankings. That is because those that can demonstrate attractive locational quality will benefit from corporate investment, new jobs, and the prosperity these things bring. Credit Suisse’s Locational Quality Indicator for 2020 explains the special role corporate taxes played this year.
The annual Locational Quality Indicator (LQI) compiled by Credit Suisse measures the attractiveness of Swiss cantons and regions to business compared to Switzerland’s average. It provides detailed rankings, examining the causes and statistics.
Canton of Zug back on top thanks to a cut in its corporate taxes
The Canton of Basel-Stadt did not hold on to its first-place position for very long. With the corporate income tax reduction that took effect at the beginning of 2020, Zug has again taken over the lead in the cantonal rankings. However, Basel-Stadt is not far behind. That is because both cantons possess highly favorable combinations of factors making them alluring.
One canton that managed to climb a striking number of places in the race is Geneva. Compared to last year, the Canton of Geneva rose a whole ten spots and now sits in fourth place behind Zurich. The second-largest advance of five places went to the Canton of Freiburg, which has now moved closer to the middle of the field and occupies 18th place.
After years of stability, there was a change at the bottom end of the rankings too: Thanks to minor improvements, particularly ones that make its tax rates attractive to legal entities, the Canton of Jura knocked Valais down into last place.
There are major differences in locational quality between the cantons
For the larger, heterogeneous cantons such as Bern, Vaud, Ticino, and Graubünden, an analysis merely at cantonal level is too superficial. There, it makes sense to analyze their locational quality at the level of the 110 economic regions. For example, the regions of Lugano and Mendrisio in the Canton of Ticino exhibit a higher locational attractiveness than their neighboring regions. However, the opening of the Ceneri Base Tunnel in late 2020 boosts the attractiveness of the entire Canton of Ticino.
Urban centers like Zurich, Zug, Basel, Baden, and Geneva benefit especially heavily from their accessibility with various means of transport. For that reason, they count as some of the most attractive locations for companies. The fact that many companies are more willing to accept a higher-than-average tax burden in those urban centers is worth mentioning. That is because better government services or infrastructure generally offset the disadvantage of that burden.
Corporate taxes also falling in other cantons
In 2020, the taxation of companies is probably the biggest criterion affecting locational attractiveness rankings. That is also because tax policy is the component of the LQI that can be most easily influenced. The Canton of Zug shows how it is done. By lowering its corporate income tax rates at the beginning of 2020, Zug came out top with legal entities in a cross-cantonal comparison. The Cantons of Appenzell Innerrhoden, Nidwalden, and Obwalden are not far behind. Going forward, there could be additional shifts in the locational quality ranking thanks to the gradual adjustments in corporate taxes in many places.
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