Government responsibilities and funding remain crucial political questions. Recent trends show government spending has matched economic growth over 15 years, primarily funded by income and corporate taxes, with income tax yielding over 60 billion francs annually. In 2025, the average top tax rate for high earners is projected at 33.2%, varying significantly between cantons. Additionally, discussions on pension fund taxation and corporate tax developments, including a proposed 15% minimum tax for large firms, are ongoing amidst varying tax burdens across regions.
What responsibilities does the government assume, and how should these be funded? These are pivotal inquiries within the realm of politics that persist through time. Over the past fifteen years, government spending has increased at a pace comparable to that of the economy. The primary financial resources for the government are direct taxes, particularly those levied on income, wealth, and corporate earnings. Notably, income tax emerges as the largest contributor, generating over 60 billion francs annually.
Tax Rates for High Incomes in 2025
The average top tax rate for high earners in 2025 is projected to be 33.2 percent across cantonal capitals. This information is derived from the latest research conducted by Pascal Hinny, a tax attorney in Zurich and an academic at the University of Freiburg. Hinny notes that these peak tax rates typically target taxable incomes ranging from 250,000 to 270,000 francs.
As is often the case, substantial variations exist across different cantons and municipalities. For instance, in Freienbach, Schwyz, the highest tax rate is a mere 19.6 percent, which is significantly lower than Geneva, where municipal rates can soar up to 44.2 percent. Over the last five years, the average tax rate in cantonal capitals has seen a slight dip of approximately 0.7 percentage points.
Unseen Tax Burdens
The official tax rates do not capture the complete scenario. High-income individuals frequently reside in tax-advantageous areas, resulting in an effective tax burden that is lower than the stated average. Conversely, these individuals encounter an additional hidden tax of around 10 percentage points due to mandatory AHV contributions on income exceeding approximately 90,000 francs, which do not yield pension benefits for them.
Furthermore, wealth tax at the cantonal level typically falls between 0.1 to 0.7 percent for substantial fortunes. Assuming a wealth yield of 3 percent annually and a wealth tax rate of 0.3 percent, this equates to an effective tax of 10 percent on the wealth yield, compounded by the standard income tax on those yields. Overall, it is anticipated that high-income earners will pay around 40 to 45 percent of their reported income in taxes this year, consistent with previous years, although utilizing corporate structures can lead to significant savings.
In comparison among cantons, both Zurich and Bern are recognized as high-tax regions. Moreover, starting in 2026, Zurich will witness an increase in imputed rental values (approximately 10 percent on average) and wealth tax valuations (over 40 percent) for properties. Hinny suggests that more pronounced increases can be expected in prime locations.
Concerns Regarding Pension Fund Taxation
Hinny asserts that the canton of Zurich is relatively disadvantaged in terms of taxing large capital withdrawals from pension funds. This subject is currently a hot topic in political discussions, with the Federal Council aiming to significantly diminish the tax advantages associated with substantial capital withdrawals from pension schemes compared to traditional pension payments at the federal level.
Hinny points out that Zurich imposes exceptionally high taxes on capital withdrawals in the millions compared to other cantons. He observes that many individuals affected have opted to relocate to different cantons prior to retirement. For instance, a single man withdrawing 2 million francs in Zurich could face total taxes of around 328,000 francs, while the same withdrawal in Lucerne would incur only 141,000 francs and in Chur, 125,000 francs.
If the proposed increase in federal taxation on capital withdrawals materializes, taxes on million-dollar amounts could double, triple, or even quadruple. “This will prompt some individuals to consider early and partial retirements before the higher rates take effect,” Hinny explains, noting that this strategy could lead to significant tax savings. Employees can already mitigate the tax progression on capital withdrawals from their pension funds by opting for partial retirement with reduced working hours and corresponding partial withdrawals. Additionally, individuals can manage tax progression in pillar 3a by holding multiple pension accounts with staggered withdrawals.
Corporate Tax Developments
In the realm of corporate profit taxes, the introduction of a minimum tax of 15 percent for large companies, as agreed upon under OECD guidelines, has generated considerable debate in Switzerland. Compared to the standard profit tax rates in cantonal capitals, 18 out of 26 cantons are still below 15 percent this year. Fifteen of these are even more than half a percentage point beneath the OECD minimum. However, the calculation of relevant profits as per OECD standards differs from that used in Switzerland, leaving it uncertain whether the 15 percent figure aligns more closely to 14 or 16 percent under Swiss calculations, depending on the individual company and financial year.
The OECD regulations primarily impact international companies with a global turnover exceeding 750 million euros. Based on preliminary federal estimates, around 200 Swiss firms and roughly 2,000 Swiss subsidiaries of foreign corporations could be affected. For these entities, a supplementary tax will apply if their tax burden in Switzerland falls below 15 percent of their applicable Swiss profits, ensuring a final tax rate of 15 percent in accordance with OECD standards.
Hinny questions whether the global minimum tax framework will falter due to external pressures from the USA but remains optimistic that the OECD and the EU will find a resolution with the USA. Switzerland’s stance will largely hinge on developments within the EU.
Notably, the OECD minimum tax influences less than 1 percent of Swiss businesses, hence it is omitted from the accompanying tax table. When assessing the standard profit tax burden in cantonal capitals, the average this year stands at 14.4 percent, reflecting a decrease of about 0.3 percentage points compared to the prior year.
Some cantons have initiated reductions in their profit tax rates for 2025 as part of long-term strategies (BL, SZ, TI). In contrast, Zug has announced a substantial tax increase for larger companies in an effort to align more closely with the OECD minimum tax of 15 percent. The appeal for Zug lies in the fact that the canton retains all revenue from the tax hike, whereas with the federal supplementary tax, a portion (possibly increasing in the future) must be remitted to the federal government. In 2023 and 2024, various other cantons have also pursued similar adjustments.
Among municipalities, Meggen in the canton of Lucerne boasts the lowest corporate profit tax burden, set at around 11 percent, which is significantly lower than the highest rate found in the most expensive municipality of Bern.