Intergovernmental Fiscal Relations in Fragmented Societies—The Case of Switzerland

In Switzerland intergovernmental fiscal relations have evolved gradually over 150 years. Like other institutions they reflect first of all the comparatively successful attempt to hold together a society fragmented with respect to linguistic and religious diversity along territorial lines. This system is marked by strong territorial decentralization both of taxing powers and expenditure assignments and by low equalizing incidence in general combined with important redistribution in cases of high symbolic value. However, both the internal demographic changes and the pattern of immigration in the last 50 years bring into question the sustainability of the present arrangements. Therefore, federal fiscal equalization is under review. It remains to be seen, if the outcome will sufficiently take into account the new forms of fragmentation in Switzerland.