Federal Department of Finance FDF Federal Finance Administration FFA Basic information Date: 29 November 2010 Tax-to-GDP ratio 2010 The tax-to-gdp ratio is the sum of all taxes and public levies in relation to gross domestic product (GDP). It determines the proportion of GDP the general government uses to finance its tasks. In Switzerland, the tax-to-gdp ratio covers all federal, cantonal and commune taxes, as well as the mandatory social security contributions to old-age, disability, compensation for loss of earnings and unemployment insurance, family allowances in agriculture and maternity insurance in the Canton of Geneva. Although mandatory, health insurance, accident insurance and pension fund contributions are not taken into account, as these corporations do not belong to the general government sector. When calculating the tax-to-gdp ratio, the Federal Finance Administration (FFA) uses as a basis the financial statistics figures, which are prepared in accordance with the guidelines of the Organisation for Economic Co-operation and Development (OECD). This ensures comparability with the tax-to-gdp ratios of other OECD member countries. Today, the OECD published its annual statistics on the tax receipts of the government units in its member countries. Deviations between the published financial statistics and the official OECD results for 2010 are due to newer tax receipt estimates by the FFA in the individual sub-sectors. Minor deviations may arise in the financial statistics data relative to the tax-to-gdp ratio published last year. This is due to the fact that all account data for the social security funds sub-sector for the period 1990-2009 was recorded in full and harmonised for the first time. Among other things, this includes complete recording of transfers (shares and contributions) from the Confederation, cantons and communes to social security funds. Consequently, all government units' receipts from taxes and duties relevant for the tax-to-gdp ratio are now recorded and subject to statistical processing. Communications FFA Bundesgasse 3, 3003 Bern Phone +41 31 325 16 06 Fax +41 31 322 75 49 kommunikation@efv.admin.ch www.efv.admin.ch
Only slight growth relative to previous year The tax-to-gdp ratio can be divided into the so-called "tax ratio", which reflects the tax receipts of the three sub-sectors Confederation, cantons and communes in relation to GDP, and the contribution ratio of the social security funds. Figure 1 shows the tax ratio compared with the tax-to-gdp ratio, while Table 1 expands on this picture with the values for the contribution ratio of the social security funds. Throughout the entire period under review, the tax ratio and tax-to-gdp ratio moved more or less in parallel, with few exceptions. The social security funds' contribution ratio also changed very little between 1990 and 2010 (up 1 percentage point). In 2010, the tax-to-gdp ratio was 29.8% of GDP, while the tax ratio was 22.8% and the social security funds' contribution ratio was 7%. Figure 1: Switzerland's tax-to-gdp ratio and tax ratio over time, in % of GDP 32.0 30.0 28.0 26.0 24.0 22.0 20.0 18.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Tax-to-GDP ratio Tax ratio Estimate for 2010 2/5
Table 1: Components of Switzerland's tax-to-gdp ratio over time in % of GDP Year Confederation Cantons Communes Tax ratio Mandatory social security contribution ratio Tax-to-GDP ratio 1990 8.7 6.3 4.5 19.5 6.0 25.5 1995 8.7 6.6 4.8 20.1 7.5 27.6 2000 11.2 6.7 4.8 22.7 7.4 30.0 2001 10.0 6.9 4.9 21.8 7.6 29.4 2002 9.9 7.2 4.9 22.0 7.7 29.8 2003 9.9 6.9 4.8 21.6 7.5 29.1 2004 10.0 7.0 4.6 21.6 7.1 28.7 2005 10.3 7.2 4.6 22.0 7.0 29.0 2006 10.4 7.1 4.5 22.1 6.8 28.9 2007 10.2 7.2 4.5 22.0 6.7 28.7 2008 10.9 7.1 4.5 22.5 6.8 29.3 2009 10.8 7.2 4.6 22.6 7.1 29.7 2010* 10.7 7.4 4.7 22.8 7.0 29.8 *Estimate In 2010, the tax-to-gdp ratio trended differently relative to 2009 in the various sub-sectors. For example, the slight increase was based exclusively on strong growth in tax receipts in the cantons and communes, which were able to take advantage of the improved economic situation in 2010. The tax ratios in these sub-sectors rose by 0.2 (cantons) and 0.1 percentage points (communes). In contrast, the 0.1 percentage point drop in the tax ratio at the federal level was triggered by minor consequences of the drop in nominal GDP seen in 2009, e.g. owing to retrospective taxation in the case of the direct federal tax. The social security funds' contribution ratio also declined by 0.1 percentage points year-on-year. This was caused by the slightly higher level of unemployment in 2010 than in 2009. 3/5
Still low by international standards Like in the past, Switzerland's tax-to-gdp ratio of 29.8% is very low by international standards (Figure 2). Of the of OECD countries shown here, which are comparable with Switzerland because of their level of development, only Japan (2009 value), Ireland and the United States have a lower tax burden. At 33.7% for 2009, the average tax-to-gdp ratio for all OECD countries is once again significantly higher than the Swiss tax-to-gdp ratio. Like last year, Denmark and Sweden are at the upper end of the scale, with 48.2% and 45.8% respectively. Figure 2: Switzerland's tax-to-gdp ratio in an international comparison, 2010 60 50 48.2 40 30 33.7 29.8 24.6 20 10 0 Denmark Sweden Belgium Italy France Austria Finland Netherlands* Germany Luxembourg UK Ø OECD total* Spain New Zealand Canada Switzerland Ireland Japan* USA *Values for 2009 Figure 3 shows the change in the tax-to-gdp ratio posted by the selected countries between 2000 and 2010. It is striking that the tax burden increased only in Italy during the period under review. The tax-to-gdp ratio declined in the other countries. However, no alignment of the tax-to-gdp ratios can be detected. For example, the fiscal burden in Japan a country with a comparatively very low tax burden remained more or less constant during the period under review. However, despite a low ratio, it declined sharply in the United States. Conversely, Sweden's tax-to-gdp ratio, which was one of the highest in the OECD also in 2009, fell significantly by 5.36 percentage points. In Italy, however, it rose in spite of an already very high level. There was no significant change in Switzerland's tax burden between 2000 and 2010. With a decline of 0.2 percentage points, Switzerland is at the upper end of the scale. 4/5
Figure 3: 2.0 1.0 0.0-1.0-2.0 International comparison of the change in the tax-to-gdp ratio between 2000 and 2010-1.6-0.2 0.8-3.0-4.0-5.0-6.0-5.6 Sweden Finland USA Canada Luxembourg Ireland Spain New Zealand Ø OECD total* France Netherlands* UK Germany Denmark Belgium Austria Switzerland Japan* Italy Table 2: International comparison of tax-to-gdp ratios over time *Values for 2009 in % of GDP 1990 1995 2000 2005 2008 2009 2010 Switzerland 25.8 27.7 30.0 29.2 29.1 29.7 29.8 Belgium 42.0 43.5 44.7 44.6 44.1 43.2 43.8 Denmark 46.5 48.8 49.4 50.8 48.1 48.1 48.2 Germany 34.8 37.2 37.2 34.7 36.3 37.0 36.0 Finland 43.7 45.7 47.2 43.9 43.1 43.1 42.1 France 42.0 42.9 44.4 44.1 43.5 42.4 42.9 UK 35.5 34.0 36.3 35.7 35.7 34.3 35.0 Ireland 33.1 32.5 31.2 30.3 29.1 27.8 28.0 Italy 37.8 40.1 42.2 40.8 43.3 43.4 43.0 Japan 29.0 26.8 27.0 27.4 28.3 26.9 -- Canada 35.9 35.6 35.6 33.4 32.2 32.0 30.9 Luxembourg 35.7 37.1 39.1 37.6 35.3 37.0 35.5 New Zealand 36.9 36.2 33.1 36.7 33.6 31.5 31.3 Netherlands 42.9 41.5 39.6 38.4 39.1 38.2 -- Austria 39.7 41.4 43.2 42.4 42.7 42.7 42.3 Sweden 52.2 47.5 51.4 48.9 46.4 46.8 45.8 Spain 32.5 32.1 34.2 35.7 33.3 30.6 31.7 USA 27.4 27.8 29.5 27.1 26.2 23.8 24.6 Ø OECD total 33.1 34.6 35.3 35.0 34.6 33.7 -- 5/5