There’s more to Zug than low taxes

Zug's medieval charm hides the fact that it is major Swiss business centre. swiss-image

Canton Zug has long had the claim to fame of having the lowest taxes within Switzerland.

However, the low tax regime is only one of a host of reasons why companies choose to locate in the tiny central canton, according to the Zug Economic Promotion Office.

At first sight the small city of Zug, nestled around a picturesque lake and surrounded by mountains, hardly appears a centre for big business. But Zug hosts a veritable bounty of blue chip international companies.

Franziska Holzgang of the canton’s Economic Promotion Office told swissinfo that her office looks for a broad selection of companies to invest in the canton.

“The commercial region of Zug owes it attractiveness to a large number of economic, social, cultural and political factors,” Holzgang said. “Zug is business friendly by tradition. And as a partner to companies, the city and cantonal authorities are very cooperative.”

The Dutch oil company, Petroplus, moved to the canton in 1999 when the group bought up some of Shell’s Swiss interests, and has been satisfied with the service it has received.

“You always feel like the customer here,” manager Hans Steinmetz told swissinfo. “The authorities don’t waste time asking what you want. They just get on and help you and they don’t make promises that they fail to keep – when they say it they do it.”

It’s not just the accommodating attitude of the authorities in Zug, cutting through so much red tape, which attracts businesses to the region. Its reputation as a go-ahead canton on investment in infrastructure and services has also brought in companies.

“I think Zug’s got it right as they build the infrastructure first and then get the people moving into Zug second, not the other way round,” said Steinmetz. “Take the new urban railway project in Zug, it’s not needed now but it will be needed in say three, five or even 10 years from now – this means we wont see the transport system collapsing as the city expands in size.”

The evident attraction of having the lowest taxes in Switzerland shouldn’t be under-estimated. According to a study by international accountants KPMG, the maximum tax cost on corporate profits is 17.8 per cent in canton Zug, whereas the average for all the cantons in Switzerland is 25.1 per cent.

“It is one factor among others,” admitted Holzgang. “But there are also other differences, as here the tax payer is seen as a client and not as a debtor – this promotes an atmosphere of trust.”

Steinmetz says that apart from low tax, the easy links to other businesses, banks and the authorities that the canton’s Economic Promotion Office fosters are key issues.

“All that together gives you a good start and a good reason for staying in Zug,” he says.

Only 100,000 people live in canton Zug, yet over the past 20 years the number of companies doing business there has doubled with 20,000 organisations now working within the canton.

Some of these corporations are located on a ‘name only’ basis in order to benefit from the lower taxes. “I think there are still some ‘briefcase only companies’ but most are making their business here,” Steinmetz said.

Zug’s picturesque location, open and effective investment promotion style, and its well developed infrastructure – to say nothing of its lower taxes – have turned it into a booming, much-sought after business location.

by Tom O’Brien