Canton's contribution to National Equalisation Fund to be reduced by CHF 50 million

Thanks to re-negotiations relating to the National Equalisation Fund (NFA), it has been announced that Zug’s contribution to it will be reduced by CHF 50 million from 2020 onwards.

This compromise, initiated by Peter Hegglin (CVP), the former cantonal director of finance who now sits in the Council of States representing Zug in Bern, has been reached by the Conference of Cantonal Governments (KKR) and has come about in no small way thanks to the negotiating skills of Heinz Tännler (SVP), the current cantonal a director of finance.

The canton of Zug’s contributions to the fund have been a matter of hot political debate in recent years, not least after the CHF 180 million contribution in 2008 rose to CHF 341 million in 2016. As its name implies, the NFA is there to ensure wealth is spread around the country, the State and seven contributing cantons (Zurich, Zug, Geneva, Schwyz, the City of Basel, Nidwalden and Obwalden, the latter two only minimally) providing the funds from which the other 19 cantons benefit. It was as a result of the effects of the 2010-2014 financial crisis in Zurich that the cantons of Zug and Schwyz in particular had to increase the amounts they paid in.

Residents of these latter two cantons began to resent the amount of money handed over in this way, not least as it inevitably meant people having to tighten their belts; some residents calling on the cantonal governments to refuse payment.

One drawback for the contributing cantons was that, with the benefiting ones in the majority, there was always more support in the National Parliament for them, too. Fortunately, the compromise worked out at the KKR meant that the way the contributions were worked out were “de-politicised”.

Inevitably, as Charly Keiser, the journalist who wrote this article pointed out, the question now arises as to how the money which would otherwise have gone to the fund will be spent.

Speaking in his capacity as leader of the of the SVP party in the cantonal parliament, Manuel Brandenberg praised Tännler’s efforts but complained Zug was still having to contribute too much to the fund.

For her part, Barbara Gysel, the leader of the cantonal SP party said that the NFA was there to redistribute wealth and worked “more or less well”. With Zug benefiting from so many companies which operated internationally, she felt it only appropriate that the OECD was right in highlighting the “base erosion and profit shifting” and that it was important the State reacted and forced the cantons to react, too.

Speaking in her capacity as leader of the the FDP parliamentary party, Karen Umbach said she thought the additional funding might lead to a reduction in tax, “though nothing should be done too hastily”, she said, while adding that the current cutbacks in the canton should still be maintained.

Meanwhile Andreas Lustenberger, the leader of the cantonal Alternative Green Party, said that, while Switzerland was a relatively small country, there were huge differences when it came to income, something which would not be changed by this compromise. “Nevertheless, it is something positive for Zug,” he said, pointing out that the canton was one which was growing economically, hence investments should be made in the public service area. He was against a reduction in tax, pointing out that the focus should be on what the canton provided, not fiscal matters.

Speaking in his capacity as head of the CVP parliamentary party, Thomas Meierhans praised the contribution made by Peter Hegglin in this compromise, not least as it presented Zug with more room to manoeuvre, but still felt the canton should continue its policy of cost-cutting.