28 October 2011. According to Professor Gärtner, the dividend tax is not socially fair because it subverts the redistribution goals that cantonal tax rates are aimed at. While the dividend tax forces those earning lower and medium incomes nationwide to unconditionally bare their financial circumstances and earning capacity, higher earners usually benefit from hiding their finances behind bank secrecy.

Concealing capital income yields financial benefits
The study first identified the marginal tax rates of various income groups of married and single taxpayers enacted in the main cities of the cantons. It shows the threshold at which the marginal tax rate exceeds the dividend tax rate of 35 percent and, therefore, yields financial benefits to conceal one’s capital income. Next, the study estimates the distribution of taxable income over the same income groups, again for married and single persons. This allows conclusions about how many taxpayers are tempted to incompletely declare their capital income because of the interaction of bank secrecy and the dividend tax.

Bank secrecy protects privacy of the rich

Gärtner’s study found that in only five cantons, Appenzell Innerrhoden, Nidwalden, Obwalden, Schwyz und Zug, are income tax rates low enough that the dividend tax is effective for the whole range of incomes. In the other cantons, where the marginal tax rate sooner or later exceeds 35 percent with increasing income, 30 percent of married taxpayers and 17 percent of single taxpayers can be better off if they do not declare their capital income completely. The study entitled “Bank Secrecy and Dividend Tax: Repercussions for Tax Honesty in Switzerland’s Cantons” was published in the journal Perspektiven der Wirtschaftspolitik 12 (2011), nr. 3, pages 258-279.

Picture: Photoshop / Yunioshi