Inequality and Redistribution in Switzerland: Evidence from Distributional National Accounts

“A growing literature emphasizes the need to link distributional microdata with aggregate economic statistics to construct Distributional National Accounts (DINA), enabling a detailed analysis of income and wealth inequality. This paper is the first to undertake this effort for Switzerland, covering the time span from 2003 to 2020.
DINA allow us to gain a deeper understanding of the recent trends in the distribution of income and wealth, taking into account all components contained in the country’s national accounts—and not just those covered in personal income tax statistics. As a result, the Swiss DINA will enable researchers and policymakers to address several relevant questions, for example: how was economic growth distributed along the income and wealth distribution? Who bears the burden of income, wealth, corporate, and consumption taxes? And how progressive are the different taxes and the tax system as a whole? In addition, because our underlying data is based at the individual rather than the household level, we are able to study how differences in income and wealth between men and women as well as between different age groups have evolved over time. Beyond documenting distributional trends and moments for Switzerland, our DINA will contribute to the international effort to harmonize inequality statistics and to make distributional analysis comparable across countries.
Leveraging that Switzerland is a highly fiscally federalized country, in which income groups systematically sort into jurisdictions with different tax rates, we also gain new insights into the distributional effects of intensive local tax competition. Given the increased mobility of taxpayers, especially within Europe, these findings are of relevance beyond the Swiss context. Furthermore, Switzerland is also one of the few countries that still collects a substantial share of tax revenue from a wealth tax (roughly 12% of all personal taxes). Our DINA series allow us to assess the distributional impact of
the wealth tax and its role for total tax progressivity.
We follow the approach outlined in the previous DINA literature. Our analysis is based on detailed, individual-level income and wealth tax data (observed jointly), survey data and aggregate national accounts. Unlike most countries, Switzerland requires comprehensive tax declarations across the entire distribution, covering not only income but also wealth and capital income components, such that we do not need to impute non-filers.”