• Geneva to make biggest advance in rankings: Credit Suisse
  • Zug to retain top spot with plan for lowest corporate tax rate

Basel City will leapfrog Zurich to become Switzerland’s second-most attractive location for businesses by 2020 as Swiss cantons cut corporate tax to bolster their appeal, according to Credit Suisse Group AG.

Basel, home of Roche Holding AG and Novartis AG, will move up two places in the ranking of 26 cantons over the next four years, given a plan to reduce its tax rate to 13 percent from 22.18 percent, Credit Suisse said in a study published on Thursday. The placing of the French-speaking cantons of Geneva and Vaud is set improve the most after similar tax cuts, while Zug will cement its top spot with plans to introduce the country’s lowest rate of 12 percent.

Swiss cantons are cutting their corporate tax rates in the face of European Union pressure to scrap preferential fiscal deals for foreign companies. That will give Basel and Geneva an edge over mountainous cantons that lack large pools of highly qualified labor and easy access to airports, which are also parameters used by Credit Suisse to construct its locational quality ranking.

“Most cantons will reduce their corporate profit tax rates in order to offset the elimination of tax privileges,” Credit Suisse said. “Cantons with little to offer besides a low tax rate will lose relative attractiveness.”

Other highlights from the study:

  • Neuchatel and Lucerne, which reformed their tax system earlier, are likely to drop down in the rankings.
  • Regions with internationals airports fare better, giving an advantage to Geneva, Basel and Zurich.
  • Some smaller towns, including Nyon in Vaud and Mendrisio and Lugano in Italian-speaking Ticino, have a wider appeal than surrounding areas.
  • The cantons of Uri and Ticino will in coming years benefit from the construction of base tunnels through the Alps, providing better links between northern and southern Switzerland.
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