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OECD Economic Surveys: Switzerland 2007

image of OECD Economic Surveys: Switzerland 2007

This edition of OECD's periodic survey of the Swiss economy finds that recent developments paint a picture of continued strength, but a number of key challenges remain, including an enormous current accout surplus, making fiscal policy more supportive of economic growth, deficiencies in the regulation of goods and services markets and further raising the contribution immigration to prosperity.

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Making fiscal policy more supportive of economic growth

Switzerland’s fiscal institutions have been successful in keeping the overall level of taxation and spending at a moderate level, and the use of budget rules at different levels of government has improved the conduct of fiscal policy. However, in recent years the increase in spending, particularly on social programmes, has been considerable. Reform of these programmes is needed not only to guarantee budgetary sustainability, but also to free up public resources that can be put to better use in promoting growth. Retaining and reintegrating people with health problems in the workplace is called for in order to cope with the pressures on the labour supply that population ageing will create. The tax system could be simplified in order to reduce the administrative burden placed on firms, especially small- and medium-sized enterprises and start-ups. In addition, tax-induced distortions to labour and capital allocation decisions should be eliminated in order to increase productivity growth. This chapter examines the fiscal outlook and explores ways to improve the role of the government in establishing a firm basis for sustained growth.

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