Background
The Zug Cantonal Council adopted the eighth partial revision of the cantonal tax law in early July 2023 after two readings. The focus of the proposal is a tax relief for individuals. Besides that, the Council has decided on a solidarity contribution from the Canton to the Zug municipalities in order to cushion the municipalities' anticipated tax shortfalls. The new code, at the request of the Cantonal Council, is subject to a public vote on 26 November 2023. The package is expected to take effect on 1 January 2024.
Balanced tax bill to promote the fiscal location
The key elements of the tax reform are as follows:
- Increased deductions for childcare
- Reduction of the wealth tax rate by 15% while doubling the tax-free amounts
- Partial adjustment of the income tax rates
- Continued retention of the increased personal deductions from the Covid-related tax measures
These tax reductions are intended to be financed through additional revenues from the planned OECD minimum tax for corporations. It is expected that the municipalities will not benefit from these additional revenues but, in return, will no longer be required to contribute to the National Financial Equalization Fund. In addition, the Cantonal Council has decided that the municipalities will receive individual solidarity contributions for the transition period 2024 - 2027 to compensate for the difference between the expected tax revenue shortfall of the tax bill and discontinued participation in the national fiscal equalization scheme. This makes the proposal balanced and widely supported. Since the proposed changes are interdependent, they constitute a comprehensive package and cannot be assessed independently.
This relief package for individuals is also a measure to indirectly promote the tax location, as the leeway for companies will be significantly limited by the planned OECD minimum tax. The canton of Zug is striving to maintain its attractiveness as a business location so as to remain at the top position in the nationwide comparison.
Update: On 26 November 2023, the Zug population clearly approved the bill to amend the Tax Act with over 72% of votes in favour.
