Tax Comparisons
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01. Januar 2019

Tax comparisons

The actual tax load for enterprises and highly qualified employees in selected regions of the extended alpine region:

1. Letter

The centre for European economic research Ltd. (ZWE) compiled a study in 2003 for the International Benchmark club of the BAK Basel Economics AG, in which location-specific tax burdens for companies as well as the actual tax load for highly qualified workers are quantified. Therefore selected locations from the European alpine region, from further Western European industrial nations as well as from the USA were examined.

Companies pay taxes on profits and on the active capital. Besides this, competition forces companies to compensate different international taxes on wages. From this arise burdens of taxation for the companies, which affect the attractiveness of an investment location. The two analyses are based on divergent methods; however the respective methods are based on the same basic ideas. This allows comparing the qualitative results of the partial studies.

2. Company taxation

The actual tax load can deviate strongly from tariff tax burdens. The study of the ZEW quotes therefore the more meaningful effective tax load. This includes for example corporation taxes with surcharges, further profit-dependent taxes, the real estate tax as well as special taxes on assets and the active capital. In a further step the study examines the effect of the divergent fiscal regulations on the effective load, in order to ascertain more general coherences.

3. Taxation of highly qualified employees

With the taxation of highly qualified employees, personal income taxes including possible surcharges, tax similar social insurance contributions as well as those taxes, which have to be paid by the companies themselves, are considered. The model is based on a mix of four kinds of remuneration: cash compensation, contributions to the pension plan, stock options and supplementary payments.

4. Results

Table 1 shows the effective tax load of companies, obtained by the units “actual average tax load” and “maximum tax rate”. The effective marginal tax rate expresses the maximal tax burden on a profitable investment from the view of the investor.

In table 2 the effective tax burden for highly qualified employees is shown, calculated by the division of the difference between total compensation and available income. The actual average tax load expresses how much more the employer has to spend in the respective region in addition to the available (fix) income of the employee in order that the employee reaches an income of EUR 100,000.

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