In Geneva, taxation is once again at the heart of the budget

In Geneva, the budget debate is no longer solely about administrative savings or the rise in public expenditure. It brings back to the fore an issue with which businesses are all too familiar: who pays, how much, and how stable is that over time? According to an analysis published by Blick, the canton’s projected cumulative deficits between 2027 and 2030 are set to reach 2.8 billion francs – a level described as unprecedented for Geneva.

For SMEs, the self-employed and their accountants, this debate is far from abstract. When a canton finds that its revenue is no longer keeping pace with its expenditure, several options can be considered: raising certain taxes, reviewing tax deductions, carrying out more thorough tax audits, adjusting levies, or even exerting greater pressure on public spending, which also helps to fund part of the local economic ecosystem. Even without any immediate change in the law, budgetary uncertainty must be factored into cash flow forecasts and tax simulations.

Tax cuts weighing heavily on Geneva’s finances

The Blick article links the current budgetary situation to several tax decisions taken in recent years. Since 2020, Geneva is said to have reduced various categories of tax, resulting in a cumulative shortfall of around 3 billion francs over six financial years. This figure is presented as theoretical, but it illustrates the scale of the political debate: the question is no longer simply whether expenditure is rising, but whether the revenue structure still allows it to be financed sustainably.

The most significant change for businesses dates back to the tax reform linked to the RFFA. According to Blick, the corporate tax rate in Geneva fell from 24 per cent to 14 per cent in 2020, with an annual cost at full implementation in 2024 of 380 million francs. The publication points out that the calculation also takes into account the effect of former companies transitioning from an 11.6 per cent rate to the standard rate of 13.99 per cent. Over six years, the cumulative impact is estimated at around 2.2 billion francs for the cantonal finances.

For a business, the rate of corporation tax is a key factor in choosing a location, planning investments and calculating after-tax returns. However, it never operates in isolation. It forms part of a wider context: the availability of labour, the cost of premises, infrastructure, administrative procedures, legal certainty, and the tax treatment of directors and shareholders. A tax cut can improve the competitiveness of a business location; it can also become politically precarious if public finances deteriorate.

Blick adds that in 2025, an 8.7 per cent cut in income tax would cost the state 702 million francs over two financial years, whilst a 15 per cent cut in wealth tax would cost 183 million over two years. These figures relate to individuals, but they also affect business owners: in Geneva, many SME directors are taxed both as private individuals – on their income and wealth – and indirectly via their company when it generates distributable profits.

Geneva’s SMEs: many businesses, little profit tax

A figure quoted by *Blick* particularly highlights the relationship between taxation and the economic fabric: according to State Councillor Nathalie Fontanet, 1 per cent of Geneva’s businesses pay 92.2 per cent of the cantonal corporation tax. The remaining 99 per cent, mainly SMEs according to the article, would therefore pay only 7.8 per cent of this tax. The newspaper also reports that a large majority of companies do not report any taxable profits.

This finding does not necessarily mean that SMEs ‘do not contribute’ to the public economy. A business may have little or no taxable profit whilst still paying wages, social security contributions, rent, VAT where liable, taxes, fees, and supporting the activities of local suppliers. However, from the perspective of the cantonal budget, profit tax remains concentrated amongst a small number of particularly profitable taxpayers.

For a tax consultancy, this concentration calls for a cautious interpretation. On the one hand, small companies generating modest profit margins are not necessarily the primary political targets for an increase in corporation tax, as their potential tax yield remains limited. On the other hand, when the public debate asserts that SMEs ‘under-contribute’, it may pave the way for consideration of other measures: limiting certain deductions, stricter scrutiny of commercially justified expenses, a review of minimum tax thresholds, or an increase in administrative fees. At this stage, these are not measures announced in the source, but possible mechanisms in the context of seeking to raise revenue.

Geneva-based companies should therefore avoid focusing solely on the nominal tax rate. The actual tax burden depends on taxable profit, the quality of the accounts, the treatment of provisions, depreciation, staff costs, relations with shareholders and the documentation available in the event of an audit. In a period of budgetary constraints, sound accounting becomes as much a management tool as it is a means of tax protection.

Individuals: the entrepreneur is also a private taxpayer

The debate in Geneva extends far beyond corporation tax. Blick notes that some 35 per cent of Geneva’s taxpayers with the lowest incomes pay no cantonal income tax at all. The newspaper also quotes the cantonal authorities: a family with two children in Geneva may not start paying income tax until their income reaches around 85,000 to 86,000 francs, whereas in some other cantons the thresholds are around 40,000 to 50,000 francs.

For a self-employed person or a small business owner, this reality plays a part in the trade-offs between salary, dividends, pension provision and profits retained within the company. A director’s personal income should not be planned solely with a view to ‘paying less tax’. It must remain consistent with living costs, social security cover, borrowing capacity, pension provision and the financial health of the business. A future change to income or wealth tax could alter the balance between these options.

Blick also mentions the personal tax of 25 francs, which has reportedly not been raised since 1989. Here too, the political symbolism is significant: when those at the lower end of the tax scale contribute little or nothing, and those at the top are highly concentrated, any tax adjustment becomes significant. The publication states that the top 1 per cent of taxpayers pay 36 per cent of income tax and 69 per cent of wealth tax. For entrepreneurs with substantial business and private assets, wealth tax therefore remains a key planning consideration in Geneva.

Taxable wealth is not limited to available cash. It may include shareholdings, property, receivables or assets whose tax value must be assessed in accordance with the applicable rules. For a family-run SME, the issue becomes very practical: how can the owner’s personal tax liability be funded when the value of the business is rising, but cash remains essential for day-to-day operations? This kind of tension cannot be resolved at the end of the year, but requires regular planning with the tax adviser.

Volatile revenue and audits: the cantonal budget enters the realm of business management

The Blick article highlights another area of vulnerability: Geneva’s tax revenue is said to have benefited in recent years from positive surprises linked in particular to the high profits of commodity traders based in the canton. However, exceptional profits can be volatile. For the state, this complicates forecasting. For businesses, it means that the tax environment may depend in part on sectors that do not reflect the situation of the majority of local SMEs.

In this context, the political temptation may be twofold: to seek new revenue and to secure existing revenue. The cases of tax arrears mentioned by Blick illustrate the difficulty of collecting tax at the top end of the scale. The publication reports that the amounts owed to the State of Geneva by certain high-net-worth individuals, including arrears and penalties, are said to exceed 8 billion francs, whilst noting that a substantial portion is being contested in the courts and that their recovery appears uncertain.

An SME is obviously not in the same situation as taxpayers involved in major international tax disputes. However, the general climate may influence administrative practice: requests for more detailed supporting documents, increased scrutiny of transactions between related parties, examination of entertainment expenses, checks on company vehicles, scrutiny of shareholder loans, or analysis of remuneration deemed unusual. These are standard issues in corporate taxation; they become more sensitive when public finances are under pressure.

The right response is not to become tense, but to be prepared. A director must be able to explain the economic rationale behind their decisions. Any expense recorded in the accounts must be documented. A provision must be based on an identifiable risk. Any financial relationship between the company and its shareholder must be formalised. When the accounts clearly reflect the company’s actual operations, dialogue with the tax authorities is generally more manageable.

2027 Budget: incorporating tax uncertainty into forecasts

The most politically charged statement in the Blick article is attributed to Nathalie Fontanet during the 17 September press conference on the 2027 budget: she does not rule out the possibility that the canton may have to raise taxes in the future. For a business, this statement does not allow for the prediction of a specific measure. It is, however, sufficient to justify various scenarios.

In practical terms, a Geneva-based SME can ask its accountancy firm to simulate the impact of a rise in the tax burden on its cash flow, without waiting for a draft bill. The exercise can be straightforward: start with the operating budget, then test a lower margin, a higher tax rate, changes to instalment payments, or a delay in receiving payment from customers. The aim is not to predict the political decision, but to prevent a tax change from turning into a cash-flow problem.

Self-employed people should also keep a close eye on their tax instalments. Instalments that are too low may give a false sense of security in the short term, only to create a burden that is difficult to absorb when the final tax assessment arrives. Conversely, instalments that are too high tie up cash unnecessarily. In a canton where the tax debate is intensifying, regularly adjusting income and profit forecasts becomes a management discipline.

Finally, businesses operating in several cantons must closely monitor the inter-cantonal allocation of their profits, permanent establishments and substantive functions. Should Geneva were to amend certain tax conditions, the analysis could not be limited to the legal head office. It would need to take into account actual business activity, staff, premises, risks assumed and economic substance. These factors must be examined on a case-by-case basis with a specialist.

The Geneva budget thus places taxation back at the heart of corporate strategy. Tax cuts have improved certain competitiveness indicators, but they are now part of a wider debate on the sustainability of public finances. For SMEs, the right response is neither to panic nor to ignore the warning: it is to improve the quality of their financial figures, test the resilience of their cash flow and maintain some financial flexibility before political decisions potentially result in higher tax bills.