Ticino wants to halt or cut cross-border workers' benefits (cross-border guide)

Context

In brief

• Ticino asks Bern to block or reduce refunds for cross-border workers due to tax pressures from Rome
• Two previous cases have exceeded 30 million francs with a positive outcome
• The measure aims to protect cantonal interests in tax matters
• Refunds are federal contributions to cross-border workers who work in Switzerland but pay taxes in Italy

Key facts

• What: Ticino's proposal to block or reduce refunds for cross-border workers
• When: To be defined within the negotiations with the Federal Council
• Where: Ticino (Swiss canton on the border with Italy)
• Who: Ticino State Council, in coordination with the canton
• Amount: Two cases have exceeded 30 million francs

Ticino is sending a strong signal to Rome: blocking or reducing refunds for cross-border workers. According to the canton, the measure aims to protect cantonal interests in the face of Italian tax pressures. But how exactly does this mechanism work? And what would be the consequences for those who work across the border?

The refund mechanism: how it works

Refunds are contributions paid by the Confederation to cantons that host cross-border workers. The latter, while working in Switzerland, pay income taxes in Italy according to the Italy-Switzerland Convention of December 9, 1976, and the New Frontier Agreement of December 23, 2020. However, Switzerland recognizes part of these taxes as a tax credit, but the refund mechanism provides for a transfer of funds from the Confederation to the canton of residence of the cross-border worker.

…

Operational details

Why Ticino Focuses on Cross-Border Worker Allowances: Economic and Fiscal Analysis### Impact of Allowances on the Cantonal BudgetCross-border worker allowances represent a significant item in Ticino's budget. According to unofficial estimates, transfers from the Confederation for cross-border workers may exceed CHF 50 million annually. These funds are used to finance public services, infrastructure, and social policies. Blocking or reducing allowances would mean a loss of resources for the Canton.### Comparison with Other Border CantonsTicino is not the only Swiss Canton affected by allowances. Grisons (Grigioni) and Valais (Vallese) also receive similar contributions, but the figures vary significantly. For example, while Ticino receives over CHF 50 million, Grisons settles on lower amounts. This depends on the density of cross-border workers and local tax policies.### Possible Scenarios: What Could Happen to Cross-Border Workers#### Scenario 1: Total Block of AllowancesIf Bern were to accept Ticino's proposal, allowances could be completely blocked. This would result in an immediate reduction of resources for Ticino but also less tax pressure on cross-border workers. However, cross-border workers might experience a reduction in purchasing power, especially if salaries are not adjusted.#### Scenario 2: Partial Reduction of AllowancesAn intermediate solution could involve reducing allowances by 20-30%. In this case, Ticino would still receive significant funds but with a lesser impact. Cross-border workers might suffer an indirect cut in their wages, but less drastic than a total stop.#### Scenario 3: Renegotiation of International AgreementsTicino could push for renegotiating agreements with Italy to reduce the taxable base of cross-border workers. This would mean less tax revenue for Rome but greater stability for cross-border workers.### Stakeholder ReactionsCategory associations for cross-border workers have already expressed concern over Ticino's proposal. According to internal sources, many workers fear that a reduction in allowances could translate into reduced competitiveness of Ticino's businesses, which already struggle to retain qualified personnel.### The Role of the Confederation: Balancing InterestsThe Federal Council must find a balance between Ticino's needs and international agreements. The Confederation has always emphasized that allowances are a tool to compensate cantons hosting cross-border workers and to maintain stable relations with Italy. A hasty decision could compromise this balance.### Comparison with Previous SituationsIn the two cited cases, Ticino achieved positive results by reducing or blocking allowances. However, in those episodes, international agreements as broad as the current ones were not at stake. Today, the situation is more complex, involving the Italy-Switzerland Convention and the New Cross-Border Workers Agreement.### Long-Term ProspectsIf the measure were to be implemented, Ticino might experience a reduction in available resources but also greater fiscal autonomy. However, the risks are high: Rome could react by introducing new taxes or restrictions for cross-border workers, further worsening the situation.## The Two Historical Precedents: How Previous Episodes Unfolded

Key points

What cross-border workers should do: procedures and practical tips

Verify your tax situation

Cross-border workers employed in Ticino must verify their tax position in Italy. According to the Italy-Switzerland Convention, income earned in Switzerland is taxed in Italy, but with a tax credit recognized by the Confederation. However, if the rebates were to be reduced, this could result in lower tax pressure on Rome, but also in fewer available funds for Ticino.

Check your payslip

If the measure were implemented, cross-border workers might see a change in the composition of their payslip. In particular, the following could occur:

• a reduction in indirect transfers (for example, public services funded by rebates)
• a possible salary adjustment by Ticino companies

Evaluate employment alternatives

In a scenario of reduced rebates, cross-border workers might consider employment alternatives. For example:

• Looking for work in other Swiss cantons
• Evaluating opportunities in Lombardy or Piedmont, where tax policies could be more favorable

Consult professional associations

Associations representing cross-border workers (for example, the Swiss Association of Cross-Border Workers) are monitoring the situation. It is advisable to contact them to receive updates and advice on how to protect your rights.

Stay informed about decisions from Bern

The Federal Council will have to make a decision in the coming months. Cross-border workers can monitor official communications from the Confederation and the Canton of Ticino to stay updated on any changes.

…