Wealthy individuals in Switzerland, including figures like Ruedi Noser and Lukas Gähwiler, are moving to tax-friendly cantons like Zug and Schwyz, driven by potential tax savings. While left-wing critics argue these relocations represent tax evasion, many affluent residents remain in high-tax areas. The distribution of millionaire households reveals significant geographical disparities, with tax rates heavily influencing residency choices. However, high-tax cities continue to attract the wealthy for their cultural and lifestyle offerings, indicating that factors beyond taxation are at play.
Common Grounds of Wealthy Movers in Switzerland
What do Ruedi Noser, Lukas Gähwiler, and Thomas Jordan share? These notable figures—a former Zurich councilor, the UBS vice president, and the ex-chief of the National Bank—have all relocated in recent years from Zurich to the tax-friendly cantons of Zug or Schwyz.
While it is often claimed that their relocations stem from personal choices, the underlying notion persists that these moves are influenced by the potential for a lower tax burden. In Switzerland, tax competition leads to marked disparities; for instance, an individual earning one million francs annually may find their tax obligation nearly halved by simply moving from Zurich to Zug.
Taxation Trends Among the Wealthy
This trend has provoked concern among left-wing parties, who argue that affluent individuals are evading their fiscal duties to the state. The rallying cry “Tax the rich” has gained traction, epitomized by initiatives like the inheritance tax proposal from the Young Socialists, which is set to be voted on this year.
But do the affluent truly chase after lower taxes exclusively? An analysis by the NZZ revealed that while Zug and similar tax-friendly regions do attract many income millionaires, a considerable number of wealthy individuals continue to reside in high-tax areas.
Currently, Switzerland is home to approximately 7,000 households with a taxable income exceeding one million francs, as reported by the Federal Tax Administration for the year 2021.
For many of these households, a significant portion of their income is derived from salaries, while others rely on capital gains, such as dividends from substantial company shares or rental income from properties. Additionally, approximately 350 of these millionaire households include flat-rate taxed foreigners, whose taxation is based on living expenses.
Geographically, a large cluster of income millionaires is found around Lake Zurich and Lake Zug, with Zug city alone boasting 376 millionaire households. Surrounding areas like Baar, Walchwil, and Cham contribute another 190 millionaires to this count.
The Diamond Coast along the Schwyz side of Lake Zurich is another favored destination. In the small tax haven municipalities of Freienbach, Wollerau, and Feusisberg, there are 225, 216, and 120 income millionaires, respectively. Wollerau stands out as the municipality with the highest concentration of wealthy individuals in Switzerland, where nearly one in twenty households declare an income exceeding one million francs.
Additionally, the Zurich Gold Coast hosts a significant number of affluent residents, particularly in municipalities like Küsnacht (175), Zollikon (119), Herrliberg (75), Meilen (71), Erlenbach (65), and Zumikon (64).
Despite these tax havens, the largest concentration of income millionaires is in Zurich city, which had 419 millionaire households in 2021. Other significant concentrations of wealth can be found in regions like Basel, where approximately 300 millionaires reside, as well as in Romandy, particularly in Geneva, which is home to around 530 income millionaires.
The extent of taxation faced by these wealthy individuals varies significantly based on their place of residence, a reflection of Switzerland’s federal structure, where tax rates differ across cantons and municipalities. Data from the Federal Tax Administration illustrates the disparities in the proportion of income that millionaire households contribute to state finances.
A striking east-west divide exists in terms of income taxes in Switzerland, with central Swiss cantons like Zug, Schwyz, Uri, Obwalden, and Nidwalden offering the lightest tax burdens. In stark contrast, the canton of Zurich imposes a much heavier tax load, particularly peaking in western Switzerland’s cantons of Bern, Vaud, and Geneva.
For instance, a household with a gross income of one million francs, split 70/30 between spouses and with two children, would pay approximately 180,000 francs in income taxes in Zug. Wealth taxes are not included in this figure. In Wollerau, this household’s tax obligation would be slightly lower at 173,000 francs.
If this family were to relocate to Küsnacht on the Gold Coast, their tax burden would rise to 265,000 francs, and in Zurich city, it would soar to 310,000 francs—almost double what they would pay in Zug, which is only a short 30-minute drive away.
Similarly, wealthy individuals in Basel face a tax burden of 301,000 francs, while in Bern, it reaches 332,000 francs. Those in western Switzerland’s major cities, such as Lausanne (364,000 francs) and Geneva (340,000 francs), pay the highest taxes.
Taxes undeniably play a crucial role in determining residency preferences. An analysis of trends over the past two decades indicates that municipalities with favorable tax structures have attracted the greatest influx of income millionaires.
Zug, in particular, has gained nearly 300 millionaires between 2003 and 2021, the highest increase in Switzerland. Notable growth has also occurred in tax-friendly locales such as Wollerau (159) and Freienbach (131), as well as along the Zurich Gold Coast.
This demonstrates that tax competition is indeed a factor in Switzerland, as high earners capitalize on opportunities to lower their tax liabilities through their choice of residence. Economists Kurt Schmidheiny and Marcus Roller have shown that this can also mitigate the steep progression of income taxes.
Nevertheless, taxation is not the sole consideration when selecting a residence. The analysis reveals that high-tax areas have also seen an increase in the number of income millionaires. In Zurich city, for example, there are 252 more wealthy households than two decades ago, making it the second-highest figure in Switzerland. Basel and Geneva have also added 79 and 128 millionaire households, respectively.
Interestingly, the density of millionaire households in high-tax cities like Zurich, Basel, Bern, Geneva, and Lausanne has not decreased, but rather slightly increased between 2003 and 2021. These urban centers appear to attract the affluent for reasons beyond taxation, including vibrant cultural offerings and an appealing urban lifestyle.
Moreover, very few municipalities in Switzerland have seen a decline in income millionaires. The lone exception is Muri near Bern, which has lost 16 millionaires since 2003. Thus, the concept of tax competition is not a zero-sum game.