#1. Legislative History

N. 1 Art. 135 FC was created within the framework of the reform of fiscal equalization and the distribution of tasks between the Confederation and the cantons (NFA) and entered into force on 1 January 2008. The provision replaced the former regulation in Art. 42 old FC, which provided for only a rudimentary fiscal equalization.

N. 2 The NFA reform project represented the most comprehensive reform of Swiss federalism since the founding of the federal state in 1848. The Federal Council message on the reform of fiscal equalization and the distribution of tasks between the Confederation and the cantons (NFA) of 14 November 2001 (BBl 2002 2291) identified as main problems of the old system the lack of transparency, false incentive structures and the insufficient effectiveness of equalization.

N. 3 The conception of the NFA as a total revision was controversially discussed in legal doctrine. Biaggini criticized the approach of the Federal Council and Parliament with good reasons, since the far-reaching changes fundamentally redesigned the relationship between the Confederation and the cantons.

#2. Systematic Classification

N. 4 Art. 135 FC stands in the 3rd chapter (Financial System) of the 5th title (Federal Authorities) and forms together with the tax harmonization provisions (Art. 128-130 FC) the constitutional foundation of federal financial relations. The norm is closely linked with the principles of task fulfillment (→ Art. 43a FC) and subsidiarity (→ Art. 5a FC).

N. 5 The provision concretizes the principle of federal loyalty (Art. 44 FC) in the financial sector and realizes the principle of solidarity between the member states. It stands in systematic connection with:

• → Art. 48 FC (intercantonal agreements)
• → Art. 48a FC (declaration of general applicability of intercantonal agreements)
• → Art. 50 para. 2 FC (consideration of municipalities)

#3. Elements of the Legal Norm / Normative Content

N. 6 Legislative mandate (para. 1): The Confederation is obligated to enact provisions on «appropriate» fiscal and burden equalization. The term «appropriate» grants the legislature considerable discretion but also sets constitutional limits.

N. 7 Fiscal equalization: Encompasses the redistribution of financial resources to reduce differences in financial capacity. Resource equalization aims primarily at equalizing tax capacity (→ BGE 93 I 437 E. 4).

N. 8 Burden equalization: Compensates excessive financial burdens due to geographic-topographic (e.g., mountain regions) or sociodemographic factors (e.g., center burdens). This differs fundamentally from resource equalization, which focuses on financial capacity.

N. 9 Objectives (para. 2): The non-exhaustive catalog («in particular») lists five main objectives:

• lit. a: Reduction of disparities (not complete leveling)
• lit. b: Guarantee of minimum resources (existential minimum for cantons)
• lit. c: Compensation of structural special burdens
• lit. d: Promotion of cooperation (↔ Art. 48a FC)
• lit. e: Preservation of tax competition

N. 10 These objectives are partly in tension with each other. In particular, the preservation of tax competition (lit. e) limits the extent of possible redistribution.

#4. Legal Consequences

N. 11 Art. 135 FC does not establish direct subjective rights of cantons or municipalities. The provision is not directly applicable (self-executing), but requires concretization through federal legislation, in particular the Federal Act on Fiscal and Burden Equalization (FiLaG, SR 613.2).

N. 12 Financing (para. 3): The Constitution mandatorily prescribes mixed financing:

• Resource-strong cantons: at least 2/3, at most 80% of federal contributions
• Confederation: bears the remaining share This bandwidth enables flexible adaptation to changed circumstances.

N. 13 The legislature is bound by constitutional fundamental principles in the design:

• Legal equality (→ Art. 8 FC)
• Proportionality (→ Art. 5 para. 2 FC)
• Prohibition of arbitrariness (→ Art. 9 FC)

The Federal Supreme Court reviews the concrete design of fiscal equalization with restraint, but recognizes constitutional limits (→ BGE 150 II 321 E. 4).

#5. Controversies

N. 14 Scope of redistribution: There is disagreement in legal doctrine about the constitutionally required extent of redistribution. While Frey/Spillmann advocate for extensive equalization, Biaggini emphasizes the limits that result from preserving tax competition (Frey/Spillmann, in: Der Finanzausgleich zwischen Bund und Kantonen, 1994, pp. 1-40; Biaggini, ZÖR 2002, 359-391).

N. 15 Consideration of municipalities: It is controversial to what extent Art. 135 FC in connection with Art. 50 para. 2 FC requires direct consideration of municipalities in national fiscal equalization. The prevailing doctrine sees cantons as primary addressees, while Thalmann advocates for stronger inclusion of the municipal level (Thalmann, in: Hänni, Föderalismus, pp. 56-117).

N. 16 Hardship compensation: The temporal limitation of hardship compensation is disputed. While the Federal Council message assumes a gradual reduction (BBl 2002 2291, 2377), part of the doctrine argues that special circumstances can justify an extension.

#6. Practice Guidelines

N. 17 When applying Art. 135 FC and the FiLaG, the following aspects must be considered:

• The annual calculations of resource and burden equalization are based on standardized indicators
• Challenges to equalization payments are only promising in case of calculation errors or arbitrariness (→ Judgment 2C_874/2017)
• Cantonal fiscal equalization systems must be compatible with the principles of Art. 135 FC

N. 18 The practical significance is shown particularly in:

• Tax law revisions (effects on the resource index)
• Intercantonal agreements with burden equalization (Art. 48a FC)
• Task shifts between federal levels

N. 19 Relevant for cantonal practice is that distortions in the NFA through double taxation cases are legally irrelevant and do not justify the maintenance of unlawfully levied taxes (→ BGE 150 II 321 E. 4).

Federal Supreme Court case law on Art. 135 FC is still limited due to the relatively recent origin of the provision (in force since 1 January 2008) and the primarily political-administrative implementation of fiscal equalisation and burden-sharing. The decisions to date mainly concern effects of the national fiscal equalisation (NFA) on other areas of law as well as fundamental aspects of federal fiscal equalisation.

#Fundamental Significance and Effects of the NFA

BGE 150 II 321 E. 4 (2 April 2024) The Federal Supreme Court held that distortions in the National Fiscal Equalisation caused by intercantonal double taxation cases are legally irrelevant. The effects on the NFA do not justify maintaining wrongfully levied taxes in double taxation proceedings.

«Distortions in the National Fiscal Equalisation (NFA) that may be caused by double taxation cases are no reason to permit a canton in double taxation proceedings before the Federal Supreme Court to retain wrongfully collected taxes.»

#Relationship to Cantonal Fiscal Equalisation Systems

BGE 144 I 193 E. 7.4.5 (18 April 2018) In the context of a cantonal popular initiative, the Federal Supreme Court examined the compatibility of cuts in cantonal fiscal and burden equalisation with municipal autonomy. The decision shows the constitutional limits for financial sanction mechanisms vis-à-vis municipalities.

«The envisaged benefit cuts would thus be very considerable and the pressure generated on the City of Bern to discontinue cultural operations or stop promoting them would be correspondingly great. [...] This would substantially restrict in factual terms the decision-making freedom accorded to the City of Bern under cantonal constitutional and statutory law in the area of cultural promotion.»

#Implementation of the Constitutional Mandate

BGE 93 I 437 E. 4 (17 May 1967) Even before Art. 135 FC entered into force, the Federal Supreme Court defined the fundamental objectives of constitutionally compliant fiscal equalisation. Although the decision concerned an intracantonal fiscal equalisation, it formulated general principles.

«A cantonal fiscal equalisation aims primarily to equalise the significant differences in the tax capacity of individual municipalities and thus to prevent the tax burden on citizens from differing too greatly depending on their municipality of residence.»

Judgment 2C_874/2017 (12 December 2018) The Federal Supreme Court confirmed the lawfulness of the specific design of national fiscal equalisation in the individual case. The decision concerned calculation questions in the context of fiscal equalisation 2016.

#Relationship to Other Constitutional Provisions

The sparse direct case law on Art. 135 FC shows that the Federal Supreme Court understands the provision primarily as a mandate to the legislature. Most constitutional law questions are decided at the level of implementing legislation (particularly the Fiscal Equalisation Act, FiLaG) and its application.

The decisions to date make clear that fiscal and burden equalisation is understood as an instrument for ensuring federal balance, whose concrete design allows considerable political scope for action, as long as the fundamental constitutional principles (particularly legal equality, proportionality) are preserved.