1 State - People - Authorities - 17 Municipalities - 171 General Provisions See under 101 See under 141 - CHAPTER 6 Transitional and Final Provisions (GIFA)

1 For the years prior to 2014 serving as a reference for establishing the calculation, the yield of the harmonized personal income tax and the harmonized withholding tax is obtained by dividing the yield of the personal income tax and the yield of the withholding tax collected by the municipality by the coefficient of the municipal tax on individuals multiplied by the coefficient of the municipal tax on the profit and capital of legal entities, reduced by 30 points, that is 70 points.

For the calculations of the years 2015 to 2018, the index of harmonized fiscal resources and the tax burden index are determined by considering the average indices of each municipality calculated based on the following fiscal years

Transitional Provision for the Amendment of March 27, 2019 [29]

1. For the years 2020 to 2023, a temporary allocation of 1.5 million francs, financed by the municipal aid fund, is distributed among the municipalities proportionally to the population of each and according to the altitude at which the population resides.

2. The weighting factor is 1 for the population residing between 600 m and 800 m, a factor of 2 for those residing above 800 m, and a factor of 0 for those residing above 600 m.

The equalization fund is supplied by financially strong municipalities, meaning those whose index of harmonized fiscal resources is above the average of all the municipalities.

Municipalities whose index of harmonized fiscal resources is below the average benefit from transfers from the equalization fund.

For each municipality k, if the harmonized fiscal resources gap of municipality k is positive, the transfer to the fund Tk depends on the total harmonized fiscal resources gap (ET k), the relative harmonized fiscal resources gap (ER k), and the total amount to be redistributed (M), which depends on the defined gap reduction rate.

For each municipality k, if the harmonized fiscal resources gap of municipality k is negative, the transfer from the fund Tk depends on the total harmonized fiscal resources gap (ET k), the relative harmonized fiscal resources gap (ER k), and the total amount to be redistributed (M), which depends on the defined gap reduction rate.

Initially, it is necessary to determine the relative (ER K) and absolute (ET K) harmonized fiscal resources gaps of municipality k as follows

This latter is between -1 and 1. It allows comparing the wealth of municipalities based on the fiscal income per inhabitant (RH k / POP k). The weighted average of the relative gaps across all municipalities equals 0. The further a municipality's fiscal income per inhabitant is from the average fiscal income per inhabitant of the canton's municipalities, the more the relative resources gap deviates from 0. For example, a negative relative gap indicates a lower fiscal income per inhabitant than the mean fiscal income per inhabitant. The total fiscal resources gap (with sign) is defined as follows

As shown above, the total gap has the same sign as the relative gap ER k: it is positive for municipalities with excess resources (positive ER k) and negative for municipalities with insufficient resources (negative ER k).

Table 1 – Redistribution Rate, Fund Transfer, and Total Intermediate Transfer Amount

With proportional redistribution at a fixed rate amounting to one-third of the total fiscal resources gap, the resources are redistributed independently of the relative wealth of the municipalities. The so-called progressive resource redistribution method is based on a redistribution formula involving the relative fiscal resources gap. It develops in two stages

The first stage involves raising the relative fiscal resources gap to a certain power to obtain an intermediate redistribution rate (t* k). Distinction is made between municipalities with a positive total gap (ER k ≥ 0) and those with a negative total gap (ER k ≤ 0). The considered exponent is α+ in the first case and α- in the second case. α+ must imperatively be greater than or equal to 0 (α+ ≥ 0), whereas α- must imperatively be less than or equal to 0 (α- ≤ 0). This results in a redistribution rate (t* k) that is a function of the relative fiscal resources gap for each municipality. It is then possible to provide the amount of fund transfer (T* k) related to this redistribution rate for each municipality. By summing the fund transfers, the total amount transferred by municipalities with excess resources (T* +) and the total amount transferred to municipalities with a resources deficit (T* -) are obtained. The amounts T* + and T* - are not equal and also do not correspond to the amount to be redistributed (M). The second stage allows rebalancing the situation. Table 1 defines the redistribution rate, fund transfer, and total amount of intermediate transfers.

The second stage involves applying a corrective factor to the intermediate redistribution rate (t* k) so that the total amounts to be transferred are equal to the amount to be redistributed (M). The corrective factor is the ratio of the amount to be redistributed (M) to the total amount of intermediate transfers (T* + or T* - depending on whether ER k ≥ 0 or ER k ≤ 0).

Table 2 defines the redistribution rate, fund transfer, and total amount of final transfers.

It then results in

1 The purpose of this law is to establish financial equalization among the municipalities.

2. It aims to

a) strengthen solidarity among the municipalities;

b) redistribute tax resources more equitably among them;

c) provide each municipality with the means to independently fulfill its responsibilities.

[1] Financial Equalization Includes

a) equalization of resources among municipalities (horizontal equalization);

b) complementary equalization of resources, financed by the State (vertical equalization);

c) compensation for the structural surcharge borne by certain municipalities.

"Financial equalization is achieved through an equalization fund managed by the State."

[3] Horizontal Resource Equalization Aims to Reduce Disparities in Fiscal Resources Between Municipalities.

[4] 1 Municipalities with a fiscal resources index (art. 6) higher than the average of all municipalities contribute to the equalization fund according to their population (art. 7) and their fiscal resources gap (art. 8).

2. Municipalities with a fiscal resources index lower than the average of all municipalities benefit from transfers from the equalization fund based on the same criteria.

3. The resource transfers provided for in paragraphs 1 and 2 are calculated according to the formulas set out in Annex 1.

[5] 1. The index of harmonized fiscal resources is equal, for each municipality, to the relative harmonized fiscal revenue.

2. The harmonized fiscal revenue is obtained by adding the proceeds from the following taxes levied by the municipality—corporate tax, harmonized personal income tax, harmonized withholding tax, financial compensation received by the municipality for the taxation of cross-border workers' wages—and then dividing the sum of these proceeds by the population of the municipality.

3. The relative harmonized fiscal revenue is calculated by dividing the figure obtained in each municipality by the figure obtained for all municipalities and multiplying it by 100.

4. The proceeds from the harmonized personal income tax and harmonized withholding tax are obtained by dividing the proceeds from the personal income tax and the proceeds from the withholding tax collected by the municipality by the coefficient of the municipal tax multiplied by the coefficient of the municipal tax on the profits and capital of corporate entities.

The population taken into consideration corresponds to the resident population according to the cantonal census.

[6] The Fiscal Resources Gap corresponds, for each municipality, to the difference, expressed in absolute value, between the harmonized fiscal resources index of the municipality and the average index of all municipalities.

[7] 1 Rate of Disparity Reduction corresponds to the portion of the total gap in the harmonized fiscal resources of municipalities whose index of said resources is greater than 100 which will be transferred to municipalities whose index of said resources is less than 100.

2. The rate of disparity reduction is set at 45%.

[9] 1. Vertical Equalization of Resources

Vertical equalization of resources aims to ensure that all municipalities have a minimum harmonized fiscal income, after considering the horizontal equalization of resources.

2. The minimum harmonized fiscal income corresponds to 79% of the average fiscal income of all municipalities, within the limits of the resources allocated by law.

[10] 1 To finance this vertical equalization of resources, an amount is allocated to the municipal aid fund by the law concerning the distribution of the canton’s share of the federal direct tax revenue, dated June 26, 1995.

2. This amount is distributed among the beneficiary municipalities, in addition to the horizontal resource equalization.

[11] Only municipalities whose tax coefficient is at least five points higher than the average tax coefficient of all municipalities may benefit from the vertical resource equalization system.

[13]

[14] 1 An annual allocation of 6 million francs is jointly granted to the cities of La Chaux-de-Fonds and Le Locle.

2. The cities of La Chaux-de-Fonds and Le Locle shall establish by agreement the distribution of the said allocation between them and shall inform the Council of State.

3. An annual allocation of 6 million francs is granted to the City of Neuchâtel, with the responsibility of distributing 25% of this amount, i.e., one and a half million francs per year, in favor of intermunicipal unions active in culture and sports. The City of Neuchâtel shall inform the Council of State accordingly.

4. The allocation referred to in paragraphs 1 and 3 shall be adjusted according to the evolution of the consumer price index in the year following that in which the reference index for the month of May has increased by more than 5% compared to its level at the time of the measure's entry into force or its last adjustment. It shall be financed by the State's operating account budget.

5. An additional annual allocation of 1 million francs is granted to the City of La Chaux-de-Fonds for the fiscal years 2020 to 2023.

[15] 1 An annual allocation of 6.5 million francs is jointly granted to the Cities of La Chaux-de-Fonds and Le Locle starting from the fiscal year 2024.

2. The Cities of La Chaux-de-Fonds and Le Locle shall determine the distribution of the said allocation between them by agreement and shall inform the Council of State accordingly.

3. An annual allocation of 6.5 million francs is granted to the City of Neuchâtel starting from the fiscal year 2024, with the responsibility to distribute 25% of this amount, i.e., 1.625 million francs per year, in favor of intercommunal syndicates active in the fields of culture and sports. The City will inform the Council of State thereof.

4. The allocation referred to in paragraphs 1 and 3 shall be adjusted according to the evolution of the consumer price index the year following the one in which the reference index for May has increased by more than 5% compared to its determining level at the time of the measure's entry into force or its last adjustment. It will be financed by the State's statement of results budget.

[16]

[17]

[18]

[20] 1 An annual allocation equivalent to 50% of the contribution received from the Confederation by the canton under the criterion of the altitude of geotopographical charges is granted to municipalities in proportion to their population and weighted according to the altitude at which the population resides.

2. The weighting is 0.1 for the population residing below 700 meters, 1 for the population residing between 700 and 900 meters, and 2 for the population residing above 900 meters.

[21] 1 The calculation of resource equalization and the compensation for structural burdens, carried out domain by domain in the areas of school expenses and out-of-family childcare, as well as the allocation intended for high-altitude municipalities, is performed annually.

2. The resources from the equalization fund are entirely redistributed to the beneficiary municipalities.

[22] 1 The index of harmonized fiscal resources is determined by considering the average of the indices of each municipality calculated based on the last three fiscal years whose accounts are closed at the beginning of the year of the accounting, which are the years n-4, n-3, and n-2 for the accounting of year n.

2. Repealed.

1. Payments from the municipalities to the equalization fund and the redistribution of resources to the beneficiary municipalities occur in two installments.

2. The Council of State determines the method for calculating the installments and the date of their maturity.

Transfers of resources carried out through the equalization fund are published in the management report of the Council of State.

The Council of State enacts the necessary regulations for the implementation of this law.

[23]

1. The Council of State periodically conducts an assessment of the financial equalization system and its results.

2. It presents its findings to the Grand Council and proposes, if necessary, the required legislative amendments.

**For the years 1999 and 2000, the tax burden index is calculated**

For the years 1999 and 2000, the tax burden index is calculated by taking into consideration, in addition to the product of municipal taxes levied under the Act on Direct Contributions, dated June 9, 1964 [24], and the Act on Direct Contributions Due by Legal Entities and Establishing a Withholding Tax, dated October 3, 1994 [25], any potential hospital and purification taxes, fees for the collection and treatment of solid waste, or other similar taxes.

Upon the commencement of this law, the conflicting provisions of indirect financial equalization set forth by special laws shall no longer be applicable.

1. This law shall enter into force on January 1, 2001.

2. It is subject to an optional referendum.

3. The Council of State shall, if necessary, ensure its promulgation and execution.

Law accepted in the popular vote of May 20 and 21, 2000, with 34,944 votes in favor and 17,406 against.

Law promulgated by the Council of State on June 7, 2000. Its entry into force is set to take effect on January 1, 2001.

Transitional Provision on the Amendment of November 24, 2004 [26]

By way of derogation from Article 4 of the Implementing Regulation of the Law on Intercommunal Financial Equalization (RALPFI) of December 13, 2000, the installment for the year 2005 shall correspond to 50% of the amount indicated in Annex 8 of the report by the Council of State to the Grand Council 04.033, "Second phase of disentanglement between the State and the municipalities," dated July 2, 2004, in support of nine draft laws and six draft decrees modifying the distribution of tasks and charges between the State and the municipalities, particularly its points 2.3, 5.6, and 5.6.1.

Transitional Provisions on the Amendment of December 3, 2014 [28]