confronti 2025: The great wealth: the economic and fiscal impact of inheritances and donations in Switzerland

The Institute for Economic Research (IRE), active in the Ticino region, has consistently sought to foster informed and constructive dialogue among academia, institutions, economic stakeholders, and the general public. Its mission is to promote shared reflection on issues of collective interest and particular relevance to the local community. In line with this mission, this year's edition of the Institute's annual in-depth study day will focus on a topic of significant current interest and public impact.

The 2025 edition of confronti will be dedicated to the theme "Great wealth: the economic and fiscal role of inheritance and donations in Switzerland". It will feature Prof. Marius Brülhart from the University of Lausanne and Mr Giordani Macchi, Director of the Tax Department of the Canton of Ticino.

We discussed the topic with Dr Davide Arioldi, head of the Finance section of IRE's Observatory for Public Finance and Energy (O-FPE), who explained why the subject deserves special attention today.

What prompted you to focus on this topic?

In recent years, major international tax reforms have had both direct and indirect effects on Switzerland and the Canton of Ticino. The introduction of a global minimum tax for multinational companies in OECD countries has greatly diminished the ability to use tax competition to attract international businesses. Additionally, reforms in neighbouring countries, such as Italy's flat tax on foreign income for individuals, are placing further pressure on tax regimes that previously benefited from significant contributions from high-net-worth individuals. Switzerland is directly affected by these measures, as its tax attractiveness for companies declines, while the tax attractiveness for individuals in its neighbouring countries increases. One factor contributing to Switzerland's appeal is its favourable treatment of intergenerational wealth transfers. In most European countries, except for Austria, these transfers are taxed at varying rates depending on family relationships and the amount of wealth involved. For instance, Germany imposes rates from 7% to 50%, France from 5% to 60%, and Italy from 4% to 8%. In contrast, Switzerland grants its cantons significant fiscal autonomy regarding these transfers. In cantons like Zug and Ticino, direct descendants (such as children) do not pay any taxes on wealth transfers. However, in the Canton of Vaud, a progressive tax is applied, which may also include cultural assets. The taxation scenario is different for transfers between individuals who are not related; in some cantons, the tax rate can reach up to 50%.

The choice of topic is closely linked to the strategic importance of this tax measure in both the international and cantonal competitive landscape. On 30 November, there will be a vote on the popular initiative titled "For a Socially Fair Climate Policy Financed in a Fiscally Equitable Manner (Initiative for the Future)." This initiative proposes a 50% tax on large fortunes exceeding CHF 50 million to fund future economic policy measures. The issue is particularly relevant as it falls within the broader global debate on the necessity of increasing tax revenue through greater contributions from the wealthiest individuals.

The latest exit polls regarding the initiative to tax large fortunes at a rate of 50% indicate a clear rejection of the referendum proposal. Given this context, do you think there might be any surprising outcomes or notable geographical or social differences in the results?

The latest exit polls, conducted by Gfs Bern between 5 and 20 October, estimated that 62% of the Swiss population would reject the proposal if the vote had taken place in October. Additionally, the proportion of undecided voters is notably low at just 3%. At the party level, voter support for the proposal is strongest among those from the Socialist Party and the Greens. In contrast, it is least popular among liberal voters and supporters of the Swiss People's Party (SVP). Regionally, French-speaking Switzerland and Ticino show the highest support for the proposal, with approval ratings of 50% and 52% respectively, while only 31% of voters in German-speaking Switzerland approve of it.

Are you surprised by this result? What do you think are the reasons for these differences?

Answering this question is not a trivial task. There are significant cultural differences between French- and Italian-speaking Switzerland and German-speaking Switzerland. In the former two, there is generally a greater cultural acceptance of progressive taxation, which results in higher taxes for individuals with high incomes. In contrast, German-speaking regions tend to emphasise tax competition and the overall efficiency of the tax system.

Additionally, even in the French-speaking cantons, reforms have been implemented over the past year to reduce inheritance tax, making wealth transfers more affordable. The varying distribution of large assets and corporate groups across the country may also lead to a more negative perception of tax proposals in cantons that rely heavily on tax revenues from large fortunes. A final factor that may explain this difference, as also noted by Gfs, is the result of the last two referendums in Ticino, which approved a 10% cap on health insurance premiums and an increase in the tax deductibility of premiums; both measures will certainly require significant funding from the cantonal budget. In this sense, the proposal to retain part of the national inheritance tax within the canton may have a certain appeal.

What has been the reaction of the business sector to this proposal? And what impact do you expect?

The primary concern is that wealthier taxpayers may relocate to countries with lower inheritance tax rates. Predicting the movement of such taxpayers is challenging, as this change represents a fundamental shift in the current inheritance tax system rather than just a minor adjustment to the tax rate. Additionally, this measure could create significant difficulties for intergenerational business transfers. Those who own medium- and large-capacity companies may need to finance the transfer of their businesses, which could have important implications for business operations. To repay the financing, there will be increased pressure on the distribution of corporate profits. This could result in a decline in investment in research and development, ultimately harming the competitiveness of businesses. Additionally, there may be a rise in the financialisation of control structures, potentially leading to reliance on foreign entities and vehicles that offer less transparency. In the worst-case scenario, this could even result in geographical shifts in corporate structures. The third sector, which includes foundations and other private non-profit organisations, would also be adversely impacted by this reform, as it largely relies on donations and bequests.

Do you therefore believe that the negative aspects of the proposal far outweigh the benefits? And if so, how could the resources be found to support the investments needed to ensure balanced environmental and social development in the future?

The proposal has the merit of highlighting a real problem: how to finance future social and environmental policies sustainably? This problem does not exist only in Switzerland, but in all the world's major economies. Consider, for example, the discussions on the wealth tax in France or the increase in the wealth tax in Norway. The tax competition that has been going on for the last 40 years has generally reduced the effective tax rates for the wealthiest segment of the population. Furthermore, the current economic structure, characterised by larger, more productive companies and the scale of investment required to compete with them, favours the creation of corporations and dynasties with valuations and financial resources that sometimes exceed those of states. All this has significant implications that may even transcend economic and contributory aspects. However, mitigating this phenomenon requires a systemic and coordinated approach, with solutions that have a real positive impact on public finances.

This will be the focus of the debate on 2 December: an opportunity to consider which tools can truly promote sustainable economic, environmental and social growth and whether taxation on intergenerational wealth transfers can be an effective lever in this direction.

The encounter is open to the public and will be held in the Aula Magna of Università della Svizzera italiana.

For more information and to register, visit www.ire.usi.ch/confronti