I would also guess that it does have something to do with people actually wanting to support the cantons or towns that they live in. As residents vote for and set the taxes themselves rather than some arbitrary "ruler" setting them, that is the decision people have made in Switzerland (and/or their canton and/or their town) and think that it is what is best for their communities.
Obviously this does not apply to foreign companies that do not get to vote on the tax rates, so those guys will flock to where they can get the best deal.
I would imagine the average Swiss resident or business will take into account the local environment and its need for income as well as the best tax deal for his or her situation and then make a decision based on a balance of all the factors.
Generally I have found the attitude in Switzerland about tax and income to be quite a mature debate instead of a constant attempt to "get the most money and pay the least tax".

__________________
Living it up in Gersau.

Oi, less of that you!

Companies can have special deals with the Cantons to get a very low corporate tax. These can be equivalent to the tax rates in cantons like Zug.

The company where I work, it was not financially better off to move to Zug.

Indeed. Whether you are starting a business or buying a new build apartment, I would recommend not scrimping on proper advisors. Especially people in glass houses.

AYB

You mean individual companies can just bargain with the canton authorities for a lower tax rate? ("Look, lower it or I'm gone." ?)

This is IMHO the best of the replies I've read so far.

Taxes aren't everything. In fact the Swiss know that Zug is a low tax haven so companies from there may in certain situations be disadvantaged as they are considered "cheap". Everybody knows that 90% of clothes, computers etc come from Chna. But how many use the "made in China" label as a sales argument. Ever wondered why?

Wollerau probably. Depressingly boring people like Roger Federer live there. Some time ago the farmers realised that farming sugar beet was no longer profitable, with all those nasty foriners buying cane sugar (brown) instead so they started farming millionaires on their land. They invented a fiscally intensive seed drill and a tax efficient hatchery and now Schwyz is the worldwide #4 exporter of organically grown millionaires. It doesn't half smell though which is which most people eventually moved away but they make so much money on the farming these days it doesn't matter.

I find it kind of weird that foreigners can start a business in a Swiss canton/municipality of their choice and keep staying in their home countries, but the Swiss can't (legally). Hmm..

It is perfectly ok for a Swiss person to register the seat of his/her company in canton A while the operations are in canton B. Both cantons will seek to tax the business in that case.

Indeed. The train was invented in Zug (hence the name).

I read somewhere that Luzern will have the lowest coorporate tax rate next year....so maybe Zug will empty out a bit !

My last company relocated their European HQ from UK to Rolle, Vaud.
They had to relocate the top executives there to legitimize it, so head of logistics, head of sales, finance director etc. I think they needed to get something like 25 people moved in all.
They definitely negotiated a good tax rate.

Probably not that much negotiation on the rate was needed. The French part has been rather aggressive attracting foreign companies by giving 5 to 10 year tax holidays to the companies, hence the number of UScos that moved their (EU) HQs there recently.

Our company shifted to Zug for tax reasons then got hammered on the rent of the office. Most companies try to stay within a reasonable distance to the railway station so they maintain a connection with Zurich and the airport but that's where the rent is through the roof.

It's in many cases a false economy.

Not to mention we pissed off clients having to schlepp an extra half hour on the train from the airport instead of a hop, skip and a jump to Zurich.

Double taxation in Switzerland. Who would have imagined?

Yeah, best keep away hey!

Where I live taxes are high, but rents and house prices very low.

Nope, profits/taxes are split between cantons. In a way the treatment is more or less the same as compared to a foreign company that owns a branch in CH.

Being American there is little advantage to living anywhere (unless the rate is higher than it is at home), so I got to take a tax neutral look at living. I work in Wollerau, but the rents in Wollerau (Canton Schwyz) versus the rents across the street in Richterswil (Canton Zurich) are astronomically higher. That cancels out some of the tax advantage for individuals.

The same math applies to companies. The company principals and the company can both negotiate favorable tax deals -- if you are rich enough then such a negotiation saves you tons of $. But you have to live in Wollerau, Pfaffikon, or Zug.

On the other hand, if you dig cities, quality of life, and other people, Zurich with its higher tax rates might work better for you. And it may be that you attract better (or less greedy) workers by locating in a city with some allure other than a low tax rate.

Because you get the pleasure of knowing that none of your earnings go to the US government and that balances out paying more tax overall???

It simplifies returns, and this varies greatly with income levels, so I short-cutted the actual determination in my post, but there was nowhere I looked near where I work where my tax obligations in CH would be greater than they are in the US.

No wonder some of you in tax havens think Switzerland is a bit miserable. Most people I know choose to be where they live because of friends, family, nice atmosphere, etc - and therefore life is enjoyable there. If too many people go to an area just for tax reasons- it must be full of ex-pats and perhaps Swiss with other 'colder' priorities- which perhaps doesn't make for a friendly feel.