Equalization payments in Switzerland


Equalization payments in Switzerland are mechanisms to redistribute financial resources both between the Confederation and cantons, and between cantons and their municipalities.
In 2023, national equalization payments represent 0.7% of the Swiss GDP.

National equalization

National equalization is governed by the federal government. It aims to support cantons that are worse off due to resources or costs. This equalisation is intended to strengthen cantonal financial autonomy and reduce the differences in the tax burden between the cantons.
The payments are funded both by the Confederations and by the cantons. In 2023, equalisation of resources represents 78% of payments, and equalisation of costs 16%. The remaining 6% are due to transitionary instruments that were introduced to ease the impact of legislative changes.

Equalisation of resources

Resource equalisation aims to ensure that each canton has sufficient financial resources to fulfil its tasks. The economic capacity of a canton is measured by its resource potential, calculated based on its taxable income, wealth of its residents, and the taxable earnings of its juridical persons.
A resource index is calculated for each canton by dividing its per capita resource potential by the Swiss average. Cantons with a resource index above 100 points have high resource potential and pay equalisation contributions. Cantons with a resource index below 100 points have low resource potential and receive equalisation contributions.
In 2023, the following 8 cantons are donors, while other cantons are takers: Obwalden, Zug, Schwyz, Nidwalden, Appenzell Innerrhoden, Basel-Stadt, Zurich, Geneva. The largest recipient canton is the canton of Valais.

Equalisation of costs

Equalisation of costs helps cantons which have to bear above-average costs over which they have no influence. It consists of two parts:
  • Compensation for costs due to socio-demographic factors, due to the structure of the population or to their function of centre
  • Compensation for costs due to geo-topographical factors, due to high altitude, slope of the terrain, or low population density.
In 2023, the following 6 cantons are donors, while other cantons are takers: Zug, Schwyz, Nidwalden, Basel-Stadt, Zurich, Geneva. The largest recipient canton is the canton of Valais.

Legal basis

National equalization is governed by the Federal Act on Financial Equalization and Compensation of Burdens, and complemented by an implementation ordinance.

Cantonal equalization

Cantonal equalization is governed by each canton. In Switzerland, municipalities have the ability to set their own tax rate. In most cantons, fiscal equalisation is intended to support municipalities with weaker taxation by ensuring balanced conditions in the tax burden of the municipalities.