Lump-Sum taxation: A brief about its origin.

 


When Charlie Chaplin arrived in Switzerland, the cantons implemented lump-sum tax regimes that attracted foreign celebrities to move to Switzerland. Even though there has been a political debate about such tax arrangements, it is not just limited to foreign countries but also happening in Switzerland. Cantons like Zurich and Basel abolished lump-sum taxation based on referendums or legislative initiatives. The Swiss tax system allocates taxation rights at a federal and cantonal level. Since tax laws are subject to referendum, people have the final say on taxes. According to the Swiss taxman, this may be a reason why direct and indirect taxes are not the highest in the international comparison. 


Let’s understand what lump-sum taxation exactly is. It is a taxation methodology based on the taxpayer’s cost of living. The taxable base is then relevant for federal, cantonal wealth taxes. The benefit of lump-sum taxation is attractive tax results mainly if the taxpayer’s foreign income exceeds the individual cost of living. Read through the blog to know more. 

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