1The main structural features of any tax, in particular those liable to pay tax, the object of the tax and its assessment, are regulated by law.
2Provided the nature of the tax permits it, the principles of universality and uniformity of taxation as well as the principle of taxation according to ability to pay are applied.
3Intercantonal double taxation is prohibited. The Confederation shall take the measures required.
Art. 127 BV - Principles of taxation
#Overview
Art. 127 BV establishes the most important rules for all taxes in Switzerland. The Constitution prescribes how taxes must be structured and which principles apply. The provision applies to the Confederation, cantons and communes — all must observe these requirements in tax legislation.
Paragraph 1 requires the principle of legality: taxes must be regulated by law. Parliament must determine who pays taxes, for what purpose taxes are levied and how high they are. A mere ordinance by the government does not suffice. Example: The Canton of Zurich may not levy a dog tax without the cantonal parliament having established the tax, the amount and the affected dog owners in the law.
Paragraph 2 contains three important principles: First, generality — all those in the same situation must be taxed equally. Second, uniformity — the tax law must be applied consistently. Third, the principle of ability to pay — those who earn or possess more should also be able to pay more taxes. The wealthy may therefore not be burdened less than the poor.
Paragraph 3 prohibits double taxation between cantons. No one may have to pay taxes for the same income in two cantons. If someone moves from Zurich to Bern, it must be clear which canton taxes the annual income. The Confederation must intervene in disputes between cantons and create solutions.
These principles protect against arbitrary taxation and ensure fairness. They apply to all types of taxes: income taxes, wealth taxes, value added tax or dog tax. Anyone who feels unjustly taxed can invoke Art. 127 BV and if necessary call upon the Federal Supreme Court.
Art. 127 FC - Principles of taxation
#Doctrine
#1. Legislative history
N. 1 The current Art. 127 FC dates back to the total revision of the Federal Constitution in 1999. The provision systematically brings together the principles of taxation that were previously scattered across various articles of the former FC (BBl 1997 I 417). The principle of legality was already established in Art. 4 of the former FC, while the ability-to-pay principle was judicially derived from the principle of equality. The prohibition of intercantonal double taxation was expressly anchored in Art. 46 para. 2 of the former FC.
N. 2 With Art. 127 FC, the constitutional legislator intended no material change, but rather an updating of the existing law with more precise formulation of the recognised principles of taxation (Behnisch, BSK BV, Art. 127 N. 1). The inclusion of the ability-to-pay principle in para. 2 codifies the long-standing Federal Supreme Court practice regarding Art. 4 of the former FC.
#2. System
N. 3 Art. 127 FC is located in Title 3 on the Confederation, Cantons and Communes and forms the financial order chapter together with Arts. 126–135 FC. The provision contains substantive legal requirements for all taxes of the Confederation, cantons and communes. It complements → Art. 164 para. 1 let. d FC (legislative powers) and → Art. 5 FC (general principle of legality).
N. 4 The relationship to → Art. 8 FC is close: the principles of taxation concretise the general principle of equality for tax law. → Art. 36 FC finds no direct application, as taxes do not constitute fundamental rights interferences, but rather original state tasks (BGE 136 I 65 E. 3.1). → Art. 129 FC regulates tax harmonisation and complements the substantive requirements of Art. 127 FC.
#3. Elements of the offence
N. 5 Principle of legality (para. 1): All taxes are covered in the sense of unconditional levies to cover general financial needs. The formal law must regulate the following elements (Behnisch, BSK BV, Art. 127 N. 7; prevailing doctrine and Federal Supreme Court practice):
- Circle of tax subjects
- Tax object
- Material assessment
- Temporal assessment
- Tax rate
N. 6 The requirements are strict: mere authorisations for tax collection are insufficient (BGE 143 II 283). Even communal taxes require a formal legal basis at the cantonal level (BGE 140 I 176).
N. 7 Principles of taxation (para. 2): The enumeration is not exhaustive («in particular»). The generality of taxation prohibits privileges that are not objectively justified (Behnisch, BSK BV, Art. 127 N. 24-26). Uniformity requires consistent application of tax laws. The ability-to-pay principle demands taxation according to economic capacity (BGE 137 II 353; Behnisch, BSK BV, Art. 127 N. 28-47).
N. 8 Prohibition of double taxation (para. 3): Prohibits the multiple taxation of the same tax object by different cantons for the same period. Virtual and actual double taxation are covered (Behnisch, BSK BV, Art. 127 N. 54-56). The Confederation must take the necessary measures, primarily through the THA.
#4. Legal consequences
N. 9 In case of violation of the principle of legality, tax decrees are void. The Federal Supreme Court consistently overturns insufficient legal bases (BGE 143 II 283). However, in practice a certain restraint is shown in enforcement (Behnisch, BSK BV, Art. 127 N. 14-16: «The Federal Supreme Court has repeatedly accepted insufficient legal bases for taxation»).
N. 10 Violations of the principles of taxation lead to the unconstitutionality of the affected provisions. The Federal Supreme Court declares regressive tariffs as incompatible with the ability-to-pay principle (BGE 133 I 206; Behnisch, BSK BV, Art. 127 N. 85-86). Progressive tariffs are constitutional, proportional tariffs («flat tax») are controversial.
N. 11 In case of double taxation, the affected party can appeal to the Federal Supreme Court by means of a constitutional complaint (→ Art. 189 para. 2 FC). Recent practice has abandoned the forfeiture of the right of appeal (BGE 149 II 354).
#5. Controversies
N. 12 Regressive taxation: The Federal Supreme Court considers (partially) regressive tax tariffs to be unconstitutional (BGE 133 I 206). Certain economists criticise the ability-to-pay principle and advocate for proportional tariffs (flat rate tax) or even regressive tariffs (Behnisch, BSK BV, Art. 127 N. 85-86). However, the prevailing doctrine supports the Federal Supreme Court's progressivity postulate (Reich, Steuerrecht, § 2 N. 89; Matteotti, Steuergerechtigkeit, S. 234 ff.).
N. 13 Scope of the principle of legality: While the prevailing doctrine wants to see all essential elements anchored in law (Baumberger, AJP 2012, 908), practice sometimes accepts insufficient legal bases (Behnisch, BSK BV, Art. 127 N. 14-16). This discrepancy between constitutional text and constitutional reality is criticised in the literature (Klett, ZSR 1992 II 45).
N. 14 Scope of the prohibition of double taxation: It is disputed whether international double taxation is also covered. The prevailing doctrine and practice restrict Art. 127 para. 3 FC to intercantonal relationships (Locher, Interkantonales Steuerrecht, § 1 N. 12; Höhn/Mäusli, Interkantonales Steuerrecht, § 2 N. 8). A minority advocates for extended protection (Senn, Besteuerungsgrundsätze, S. 167).
#6. Doctrine and criticism
N. 15 Doctrine intensively discusses the tension between federalist tax competition and constitutional minimum standards. Reich (Steuerrecht, § 3 N. 45) emphasises the importance of tax competition for the innovative power of the tax system. Matteotti (Steuergerechtigkeit, S. 89 ff.) warns against a «race to the bottom» in corporate taxation.
N. 16 The incomplete enforcement of the principle of legality is viewed critically. Baumberger (AJP 2012, 914) criticises the too generous practice regarding ordinance delegations. Klett (ZSR 1992 II 78) demands stricter standards analogous to criminal law.
N. 17 The ability-to-pay principle faces increasing economic criticism. Tipke (Steuerrechtsordnung II, § 17 N. 34) defends it as an indispensable element of tax justice. Proponents of the flat tax argue with efficiency gains and growth impulses, but find little support in Swiss doctrine.
#7. Practical guidance
N. 18 In legislative drafting, all five core elements (tax subject, object, assessment, period, tariff) must be explicitly regulated. Dynamic references to ordinances are inadmissible. Communal taxes require a cantonal legal basis with precise framework requirements.
N. 19 For tax planning, the prohibition of double taxation is central. In case of change of domicile, prior clarification of tax allocation is recommended. The abandoned forfeiture practice (BGE 149 II 354) considerably expands legal protection.
N. 20 In tariff design, caution is advised: even indirectly regressive elements (high lump-sum deductions) can be unconstitutional. Progressive or proportional tariffs are unobjectionable. Social deductions must be included in the overall consideration (BGE 134 I 248).
N. 21 In procedure: objections due to violation of Art. 127 FC must be raised early. The constitutional conformity of cantonal decrees can be reviewed by means of abstract judicial review. In intercantonal conflicts, the direct route to the Federal Supreme Court is open.
Art. 127 FC - Principles of taxation
#Case law
#Principle of legality (paragraph 1)
BGE 143 II 283 of 17 March 2017 The principle of legality requires that the design of taxes be regulated by law in its basic features. Basis for strict application of the principle of legality for levies without constitutional justification.
«The amount of the levy (11 million francs) is determined solely by a governmental ordinance and the formal law on which it is based contains no criteria for assessment. No market value can be determined either. Since the amount of the concession fee cannot be reviewed based on constitutional principles (cost coverage/equivalence principle), the requirements for the legal basis cannot be relaxed.»
BGE 132 I 157 of 12 April 2006 Differential taxation of the imputed rental value of primary and secondary residences is permissible if regulated by law. Confirms the necessity of an adequate legal basis for tax differentiations.
«Principle of legality in tax law. Law in the formal sense. Setting of levies by the cantonal parliament.»
BGE 140 I 176 of 1 January 2014 A secondary residence tax is constitutional if it is regulated in a formal law. Clarifies the requirements for the legal basis for municipal taxes.
«The levy in dispute is a tax and not a causal levy. The secondary residence tax aims in particular at better utilisation of existing secondary residences in the municipal territory.»
#Principles of taxation (paragraph 2)
BGE 133 I 206 of 1 June 2007 Degressive tax rates violate the principle of taxation according to economic capacity. Landmark decision on the unconstitutionality of degressive tax rates in Obwalden.
«The new Obwalden income tax rate contradicts the general principle of equality before the law and the principle of taxation according to economic capacity. Neither reasons of tax competition nor other fiscal or extra-fiscal objectives can remedy the constitutional deficiency.»
BGE 134 I 248 of 18 March 2008 Thurgau tax rate with partial splitting does not violate the principle of economic capacity. Confirms the permissibility of family-friendly tax rates while observing proportionality.
«Constitutional requirements and principles for tax burden comparison between taxpayers in unequal economic circumstances. All factors must be included in the tax burden comparison, including social deductions and allowances that influence the tax burden.»
BGE 137 II 353 of 1 January 2011 Extraordinary depreciation must correspond to the principle of economic capacity. Specifies the application of the ability-to-pay principle in accounting matters.
«Based on the principle of taxation according to economic capacity, an extraordinary depreciation of an uncollectible claim cannot be disregarded for tax purposes merely because the taxpayer failed to make a temporary impairment.»
BGE 136 I 65 of 25 September 2009 Privileging qualified dividend income leads to unconstitutional distinctions in taxation. Decisive for the application of the principle of uniformity in dividend taxation.
«The selective preferential treatment of dividend income of qualified shareholders of companies in income taxation leads to untenable differences in taxation and is unconstitutional.»
#Prohibition of double taxation (paragraph 3)
BGE 149 II 354 of 17 August 2023 Change of practice: No forfeiture of the right to appeal in cases of intercantonal double taxation. Landmark decision strengthening protection against double taxation.
«In view of the changed factual and legal situation, the practice regarding procedural forfeiture of the right to appeal in cases of intercantonal double taxation is abandoned. Also at the substantive law level, the constitutional prohibition of intercantonal double taxation is to be strictly enforced in principle.»
BGE 132 I 29 of 17 October 2005 In the system of annual postnumerando taxation, the right of taxation is forfeited at the end of the year following the assessment period. Specifies the forfeiture periods in intercantonal tax law.
«In the system of annual postnumerando taxation, which is applied by all cantons, the right of taxation is forfeited at the end of the year following the assessment period.»
BGE 137 I 145 of 21 December 2010 Capturing real estate dealer profits with the real estate gains tax does not violate the prohibition of double taxation. Important for the delimitation of different types of taxes in intercantonal relations.
«The capturing of profits of real estate dealers with the real estate gains tax does not violate prohibitions of double taxation if appropriate delimitation criteria are applied.»
BGE 134 I 303 of 17 June 2008 Petrol stations under franchise agreements generally do not constitute permanent establishments. Specifies the intercantonal allocation of permanent establishments in tax law.
«Legitimation of the cantonal tax administration to raise double taxation complaints. Franchise agreement; petrol stations as permanent establishments?»
BGE 139 II 373 of 1 May 2013 Requirements for cantonal procedures in cases of intercantonal double taxation. Establishes procedural requirements for the implementation of the prohibition of double taxation.
«Requirements for cantonal procedures when intercantonal double taxation is complained of. Offsetting of a business loss with real estate gains.»
BGE 130 I 205 of 30 June 2004 Prohibition of double taxation for capital benefits from occupational pension schemes and private pension schemes. Fundamental for the tax treatment of pension capital in intercantonal relations.
«The prohibition of double taxation is violated when the same capital benefits of an insurance are subject to income tax in one canton and inheritance tax in another.»
BGE 131 I 409 of 1 January 2005 Double taxation treatment of the refund amount for life annuities in case of death. Specifies the prohibition of double taxation in complex pension relationships.
«The prohibition of double taxation is violated when the refund amount paid in case of death is fully subject to income tax in one canton and inheritance tax in another.»
BGE 147 I 325 of 20 August 2020 Forfeiture of the right to appeal under double taxation law in case of unconditional recognition. Last significant application of the forfeiture practice (since abandoned) before the change of practice.
«Forfeiture of the taxpayer's right to appeal under double taxation law. Beyond the constellation in which the taxpayer unconditionally recognises the claim of one canton with knowledge of the conflicting claim of another canton, forfeiture of the right to appeal must be handled restrictively in accordance with the character of the prohibition of double taxation.»