Locational quality 2022: Aargau down two places; Schaffhausen in competition with Lucerne

Locational quality 2022: Aargau down two places; Schaffhausen in competition with Lucerne

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Dr. Jan Schüpbach
Economist, Policy & Thematic Economics
Credit Suisse AG
+41 44 333 77 36
[email protected]

Media Relations
Credit Suisse AG
+41 844 33 88 44
[email protected]

After years of flux due to the corporate tax reform, the locational quality ranking shows a stable picture again in 2022. The Canton of Zug retains the top slot, ahead of Basel-Stadt, Zurich, and Geneva. The Canton of Aargau has suffered the biggest ranking loss, dropping two places to lie just behind Nidwalden and Schwyz in 7th place. According to the Credit Suisse economists, the cantons of Schaffhausen and Valais have gained in attractiveness and each has moved up one place.

The top spots in the 2022 cantonal rankings are unchanged: Zug is in first place, followed by the Canton of Basel-Stadt (see figure). Both cantons offer an attractive combination of factors. The cantons of Zurich and Geneva follow some way behind. A number of shifts occurred in the case of the other cantons with significantly above-average results: Nidwalden and Schwyz improved their position, pushing the Canton of Aargau into seventh place. In the midfield - led by Lucerne - Schaffhausen came out ahead of Thurgau, which is now in tenth place. This is mainly thanks to a tax cut for natural persons, but also a result of small improvements in terms of accessibility indicators. The Canton of Obwalden shows a better performance in terms of education and accessibility indicators and moves up two places to make it the biggest gainer in the rankings. After two years, there is a change at the bottom end of the rankings, too: The Canton of Valais has reduced corporate taxes slightly more than the Canton of Jura, pushing the latter into last place again after two years.

Tax burden: Valais, Jura, and Schaffhausen slightly more attractive on tax front

Tax policy is more easily adaptable than the availability of adequately skilled labor or a location's accessibility. This year, as previously, the significant changes within the locational quality rankings can be attributed to tax policy. In terms of personal tax, the Canton of Schaffhausen significantly reduced taxes and moved up six places in the Credit Suisse tax index for private individuals. It is also interesting to note that the Canton of Schwyz likewise became more attractive, reducing the gap versus top-placed Zug through a significant reduction in the cantonal tax multiple from 150 to 120 for private individuals. In addition, as part of the corporate tax reform (Federal Act on Tax Reform and AHV Financing; TRAF), individual cantons have reduced corporate taxes again this year. The biggest tax cuts were made by the cantons of Valais and Jura, which both moved up a place to 20th and 22nd, respectively, in the tax index for legal entities, which is based on the tax burden on companies with different profit situations in all Swiss municipalities. However, other cantons remain more attractive in terms of tax: The top spots continue to be held by the Canton of Nidwalden in first place, closely followed by Zug and Appenzell Innerrhoden. Intercantonal differences have decreased in recent years - and with it the relative advantage of low corporate taxes. Some cantons are reducing their corporate tax rates gradually over several years. A number of further reductions are likely by 2025 - particularly in the cantons of Basel-Land and Ticino - in the view of the Credit Suisse economists.

German-speaking Switzerland shows biggest rise in share of highly qualified personnel

A positive trend was evident across all cantons in terms of the indicators for the availability of specialist labor and availability of highly qualified personnel. The share of persons having completed at least secondary level II improved most in the cantons of Schwyz, Obwalden, Nidwalden, Glarus, Fribourg, Valais, and Jura, with each showing a rise of two percentage points versus the previous year. Zug, Nidwalden, and Zurich performed best, with figures of around 90%. The proportion of persons having completed tertiary education is also rising across all cantons. What is striking is the fact that the increase in French-speaking Switzerland and Ticino is somewhat lower compared with German-speaking Switzerland. Availability of highly qualified personnel is highest in the Canton of Zug at 53%, followed by Zurich, Basel-Stadt, and Geneva, each with 48%.

Regional view: Significant differences within the cantons

For the larger, heterogeneous cantons - such as Bern, Vaud, Ticino, and Graubünden - an analysis at cantonal level fails to show the full picture. Therefore, the Credit Suisse economists additionally analyzed locational quality at municipality level as well as at the level of Switzerland's 110 economic regions. The urban centers of Zurich, Zug, Basel, Baden, and Geneva, as well as their wider agglomerations, are still among the most attractive regions for companies, not least due to their high transport accessibility. Alpine regions and the regions of the Jura Arc remain less attractive to companies due to their topographical features and the distances to metropolitan areas.

Many of the changes in the regional rankings in 2022 are down to changes in the tax burden at a cantonal level. The Brig region achieved the biggest improvement compared with the previous year, with a jump of 11 places to 83rd. There were advances for the other parts of Valais, too, with Martigny and Monthey/St-Maurice rising to 93rd (+7) and 90th (+6). Climbers also included the Graubünden regions of Davos (72nd, +6) and Prättigau (77th, +5). The biggest improvement In Ticino was shown by the Bellinzona region (73rd, +8), although the two Ticino regions with the highest locational quality - Mendrisio and Lugano (50th and 58th, respectively) - also advanced. This was because the opening of the New Transalpine Railway (NEAT), and in particular the Monte-Ceneri tunnel at the end of 2020, boosted the Canton of Ticino's accessibility. This year's complete update of the three accessibility indicators, which are calculated per square kilometer, shows that Sotto- and Sopraceneri are now more closely clustered.

1. About the Credit Suisse Locational Quality Indicator

   The long-term economic potential of Switzerland's cantons and regions is primarily determined by the overall conditions for businesses. Intense competition between different locations is forcing the Swiss cantons and regions to take steps to optimize their appeal on an ongoing basis. Credit Suisse economists have provided quantitative analysis of the locational quality of Swiss cantons and regions since 1997.

   The annual Locational Quality Indicator (LQI) was developed in order to measure the attractiveness of the Swiss regions and cantons from a business perspective. The LQI serves on the one hand as a guide to companies and entrepreneurs seeking to evaluate potential locations, and on the other as a benchmarking tool for the optimization of cantonal or regional location policy. The indicator illustrates the attractiveness of an area in the form of a relative index, based on the following seven quantitative sub-indicators: tax burden on private individuals and legal entities (see credit-suisse.com/taxmonitor), availability of specialist labor and highly qualified personnel, population accessibility, employee accessibility, and access to airports.

The study "Locational quality 2022: Nidwalden and Schwyz overtake Aargau" is available in German, French, Italian, and English at:credit-suisse.com/locationalquality

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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

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