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Switzerland
Switzerland's
economic freedom score is 79.4, making its economy the 9th freest in the
2009 Index. Its score is basically unchanged from last year. Switzerland
is ranked 3rd out of 43 countries in the Europe region, and its overall
score is much higher than the world average.
Switzerland's openness
to global commerce has allowed its small economy to be one the most
competitive and flexible in the world. With an efficient business
environment and well-maintained macroeconomic stability, Switzerland has
long benefited from vibrant entrepreneurial activity.
The average tariff rate
is low, and commercial operations are protected under the regulatory
environment and aided by a flexible labor market. Inflation is extremely
low. Foreign investment is welcome, and screening applies to only a few
sectors. Both foreign and domestic investors have access to adequate
sources of credit. The national financial sector leads the world and is
both protective of privacy and open to foreign institutions. The
judiciary, independent of politics, enforces contracts reliably.
Corruption is virtually nonexistent.
Background
Switzerland, one of the
world's richest and most investment-friendly destinations, is a member of
the World Trade Organisation, the International Monetary Fund, the World
Bank, and the Organisation for Economic Co-operation and Development. A
multicultural society with four official languages, Switzerland has a long
tradition of openness to the world yet jealously guards its independence
and neutrality. The seat of the ill-fated League of Nations, Switzerland
joined the United Nations only in 2002. Two referenda on membership in the
European Union have failed by wide margins, and membership in the European
Economic Area was rejected by referendum in 1992. Swiss–EU relations are
based instead on an extensive range of bilateral agreements that are
considered quite successful. Switzerland is an international banking
center, but its economy also relies heavily on precision manufacturing,
metals, pharmaceuticals, chemicals, and electronics.
Business freedom 82.9%
The overall freedom to
conduct a business is well protected under Switzerland's regulatory
environment. Starting a business takes 20 days, compared to the world
average of 38 days. Obtaining a business license takes less than the world
average of 18 procedures and 225 days. Bankruptcy proceedings are
relatively easy.
Trade freedom 85.4%
Switzerland's weighted
average tariff rate was 2.3 per cent in 2005. Prohibitive agriculture
tariffs and quotas, restrictive biotechnology regulations, import taxes,
export subsidies, and some services market access barriers add to the cost
of trade. Ten points were deducted from Switzerland's trade freedom score
to account for non-tariff barriers.
Fiscal freedom 67.5%
Taxation is more
burdensome at the cantonal levels than it is at the federal level. The top
federal income tax rate is 11.5 per cent, but the combined top income tax
rate (federal and sub-federal) can be as high as 41.5 per cent, and the
top corporate tax rate can be as high as 25 per cent. Other taxes include
a value-added tax (VAT) and cantonal-level property taxes. In the most
recent year, overall tax revenue as a percentage of GDP was 30.1 per cent.
Government size 65.3%
Total government
expenditures, including consumption and transfer payments, are moderate.
In the most recent year, government spending equaled 34.0 per cent of GDP.
Direct government participation in the economy has been confined to such
public services as post offices, railways, and defense.
Monetary freedom 83.9%
Inflation is very low,
averaging 0.9 per cent between 2005 and 2007. Government measures
influence the prices of agricultural goods and pharmaceutical products,
and the government influences prices through regulation, subsidies, and
state-owned utilities. Ten points were deducted from Switzerland's
monetary freedom score to account for policies that distort domestic
prices.
Investment freedom 70.0%
Foreign investment
receives national treatment, and many sectors are open to private
investment. Project screening applies in only a few sectors. Joint stock
companies must have a majority of resident Swiss nationals on their
boards. Foreign investments are subject to review by the Competition
Commission if the value of the investing firm's sales reaches certain
levels. The investment code and its implementation are generally
transparent and efficient. Residents and non-residents may hold foreign
exchange accounts. There are no restrictions on repatriation of profits,
payments for invisible transactions, or current transfers. Real estate
purchases by non-residents must be approved by the canton in which the
property is located.
Financial freedom 80.0%
Switzerland is a leading
financial center with highly developed and well-regulated institutions.
Foreign and domestic investors have adequate access to capital. The
private sector enjoys access to a wide variety of credit instruments. The
federal government is not a shareholder in the central bank but has
appointment authority and approves regulations. Banks offer a wide range
of services, and credit is allocated on market terms. Banking secrecy has
been loosened to prevent money laundering and tax evasion.
Approximately 44 per
cent of all banks are foreign-controlled. Insurance is well developed, and
the state-owned postal service offers a variety of financial services.
Capital markets are strong, and the stock exchange is one of Europe's
largest.
Property rights 90.0%
The judiciary is
independent, and contracts are secure. Switzerland has one of the world's
best protection regimes for both foreign and domestic holders of
intellectual property.
Freedom from corruption
90.0%
Corruption is perceived
as almost nonexistent. Switzerland ranks 7th out of 179 countries in
Transparency International's Corruption Perceptions Index for 2007.
Corruption is not pervasive in any area of the economy, and enforcement
procedures against domestic corruption are effective. Giving or accepting
a bribe is subject to criminal and civil penalties, including
imprisonment.
Labour freedom 79.2%
Switzerland's relatively
flexible employment regulations enhance overall employment and
productivity growth. The non-salary cost of employing a worker is
moderate, but dismissing a redundant employee can be costly.
— Courtesy: The
Heritage Foundation
Quick Facts
Population
7.5 million
GDP (PPP)
$278.6 billion
3.2% growth
1.7% 5-year compound
annual growth
$37194 per capita
Unemployment
2.5%
Inflation (CPI)
0.9%
FDI Inflow
$25.1 billion
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