Swiss households are becoming wealthier, but inequality between the rich and poor is increasing, the Swiss Tax Administration warns. Reasons include low interest rates and high executive salaries.
A tax office report revealed on Mondayexternal link that the assets of the wealthiest 1% of residents increased by nearly 43% between 2003 and 2015. Meanwhile, over the same period, the assets of the lowest 75% of households grew by only 18.6%.
There are several explanations for the growing gap between the haves and have-nots, explains Ursina Kuhn, senior researcher at the FORS Swiss Centre of Expertise in the Social Sciences. Most of these reasons have a global resonance rather than being specific to Switzerland.
Rock-bottom interest rates are currently boosting the value of many financial assets and in particular property prices. “If you own several homes, you are more likely to see a rise in the value of your assets,” says Kuhn.
Many countries around the world have also seen a steep rise in the very top executive salaries compared to ordinary wages. The biggest earners therefore have even more money to put aside in savings or for investments. Wealthy people also have access to top quality investment advisors, such as family offices.
Specific to Switzerland is the controversial “lump sum” tax policy that imposes a levy on the net worth of wealthy foreign individuals rather than income. This leads to lower tax bills, which in turn attracts rich residents to Switzerland from abroad.
At the end of 2015, total net assets of households in Switzerland were valued at CHF1,792 billion ($1,807 billion), or an average of CHF215,166 per capita.
However, just over half (55.46%) of inhabitants had less than CHF50,000, while 24.53% reported zero wealth. In all, 5.72% of people living in Switzerland had assets exceeding CHF1 million and just under 1% of the population had over CHF10 million.
The cantons of Schwyz, Nidwalden and Zug had the highest per capita wealth: CHF718,473, CHF677,401 and CHF492,311, respectively. Canton Fribourg had the lowest per capita wealth at CHF99,099.
Wealth inequalities within each canton varied considerably. This is expressed using the Gini coefficient, a statistical measure of distribution, which shows how equally income is distributed by using a figure between 0 and 1. The closer to one a society scores, the more unequal it is.
The federal tax office said canton Geneva had the highest level of inequality (0.92) and canton Uri the lowest (0.72). The average Swiss coefficient in 2015 was 0.86, which had increased slightly since 2003 (0.83).
The tax office’s statistics refer to net assets (taxable assets before social deductions). This doesn’t take into account assets held abroad or the assets belonging to professional or private pension schemes (so-called 2nd and 3rd pillars). In cases where a person owns assets in several cantons, they are distributed between the cantons.