Swiss cantons, cities and municipalities expect a significant reduction in tax revenue in 2020 and 2021. This is the result of a study conducted in March and April by auditing and consulting firm PwC Switzerland in collaboration with the Federation of Swiss Cities.
According to the study, the pandemic will have a significant impact on the balance sheet for 2021. Losses in corporate tax revenue (-23% for cantons, -16.6% for cities) are more pronounced than those for individuals (-1, 1% for cantons, -1.6% for cities). For the authors, this is likely due to the fact that companies are more exposed to the financial risks of Covid-19 than individuals. The latter, for example, receives an allowance for part-time work or, in the event of dismissal, is entitled to unemployment insurance or social assistance.
From 2022, tax revenues are expected to rise again and the situation should return to normal. The majority of study participants do not believe tax increases are an appropriate way to counteract the tax losses caused by the pandemic.
Debt is expected to register strong growth for the years 2019-2023 (cantons +36%, cities +72%). The increase in the cantons will be sharp while in cities and municipalities it will be more steady. However, in the cantons, the debt will decline more quickly. “This indicates that the cantons consider their role to be to provide emergency or one-time aid,” said Roland Scheig, co-author of the study and director of PricewaterhouseCoopers Switzerland. Instead, cities and municipalities will have to deal with the long-term effects of Covid-19 and this will affect their budgets for several years.
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