Intermunicipal Financial Equalization Act (LPIV) - Object and Purpose (LPIV)

1. This law establishes a direct financial equalization between the municipalities. It also regulates the financial contribution of the State to the equalization system.

2. The purpose of this law is to mitigate the inequalities in tax burden resulting from differences in financial capacity and structural needs between the municipalities.

1. For the purposes of this Law, the following definitions apply

a. standardized tax revenue: the tax revenue calculated on the basis of

1. the taxes provided for in Article 1, letters a to d of the Law of 5 December 1956 on communal taxes [B] (LICom) that a commune could levy by applying the weighted average tax coefficient of all Vaud communes. Revenue from tax fines is not included in the calculation.

2. the property tax that a commune could levy by applying a tax rate of 1‰;

3. withholding tax;

4. the supplementary tax on real estate belonging to companies and foundations;

5. the financial compensations provided for in Article 16 of this Law, standardized to the weighted average tax coefficient.

b. weighted average tax coefficient: a theoretical tax coefficient which, applied to all communes, would allow them to collectively generate the total tax revenues they collect during a given fiscal year by applying their own rates;

c. productive area: residential and infrastructure areas, agricultural areas, and forested areas according to the criteria used by the Federal Statistical Office within the framework of the Swiss area statistics;

d. weighted number of students: the number of children domiciled in a commune and attending compulsory schooling in a public institution. Each child whose domicile is located more than 2.5 kilometers from the place of schooling is counted as 1.15. Students whose schooling costs are borne by the State in accordance with Article 134 of the Law of 7 June 2011 on compulsory education [C] are not taken into account;

e. person residing at altitude: a person domiciled in the commune whose main place of residence is located at an altitude of 730 meters or more.

1. The criterion of contributory capacity must not be used either in cantonal subsidies to municipalities or for the distribution of amounts owed by municipalities to the Canton.

1. Intermunicipal equalization is composed of

a. resource equalization;

b. equalization of structural needs;

c. a system for compensating specific urban burdens.

1. Equalization of resources aims to mitigate differences in financial capacity between municipalities.

1. Municipalities whose standardized per capita tax income is higher than the cantonal average contribute to the equalization by an amount corresponding to 80% of the difference from the average.

2. Municipalities whose standardized per capita tax income is lower than the cantonal average receive from the equalization an amount corresponding to 80% of the difference from the average.

1. Municipalities whose standardized tax revenue after resource equalization does not reach 90% of the cantonal average receive an additional amount to reach this percentage.

2. Any adjustments from previous years are not taken into account in the calculation of the minimum allocation.

1. Municipalities that collect cyclical taxes must pay a portion thereof based on

a. 50% of revenues related to transfer duties, real estate capital gains taxes, and inheritance and gift taxes;

b. 30% of revenues related to the cross-border commuter tax.

2. The proceeds from these levies are distributed among all municipalities in francs per inhabitant.

1. Equalization of Structural Needs

The purpose of equalization of structural needs is to compensate for the specific burdens borne by certain municipalities due to objective factors over which they have no control.

1. The factors for equalizing structural needs are

a. the productive area of the municipalities;

b. the altitude and slope of their territory;

c. the weighted number of pupils.

1. Municipalities whose productive area per inhabitant exceeds 120% of the cantonal median receive an amount of CHF 100.- per additional hectare.

1. The municipalities receive, per person residing at altitude, an amount of CHF 550 multiplied by the percentage of the municipality's territory with a slope equal to or greater than 35%.

1. Municipalities where the number of students weighted by the population exceeds 120% of the cantonal average receive an amount of CHF 4,000.- per additional student.

1. Municipalities that contribute to covering the operating deficits of urban traffic lines receive compensation equivalent to 60% of their contribution.

1. Municipalities shall levy the following amounts based on their population, by tranches and per inhabitant

From/inhabitant 0 1'001 3'001 12'001 15'001 30'001 45'001

Up to/inhabitant 1'000 3'000 12'000 15'000 30'000 45'000 and over

Amount/CHF 125 350 625 1'000 1'050 1'100 1'150

1. The canton allocates to the municipalities a portion of the federal compensation granted for the tax losses resulting from the implementation of the Federal Act of 28 September 2018 on Tax Reform and the AHV Financing (TRAF) [D].

2. This portion is calculated according to the ratio between the cantonal tax and the average municipal tax on profits and capital.

3. The corresponding amount is distributed among the municipalities based on the yield of their taxes on the profits and on the capital of legal entities.

4. The Council of State establishes in a regulation the methods for calculating the financial compensation allocated to the municipalities as well as the payment of the amount owed to each municipality.

5. The provisions of this article also apply to the revenue from the supplementary federal tax provided for by Article 129a of the Federal Constitution.

1. The State funds the measures provided for in Articles 7, 11, 12, and 13 of this law.

2. A maximum amount of CHF 55 million from the financial rebalancing provided for in Article 17b of the Law of 24 November 2003 on the Organization and Financing of Social Policy [E] (LOF) is allocated to finance these measures.

3. The maximum amount provided for in paragraph 2 may be exceeded to finance the minimum endowment. In any case, the amount of the financial rebalancing provided for in Article 17b LOF [E] remains unchanged.

4. If the amount provided for in paragraph 2 is no longer sufficient to finance the other measures, the Council of State would propose a new funding method to the Grand Council, after consulting the umbrella associations of the municipalities.

1. The municipalities finance the measures provided for in Articles 14 and 15 of this law.

2. The contribution of each municipality is determined in francs per inhabitant.

1. The municipal data used as a basis for calculating the equalization of resources are those of the year in question.

2. After consulting the municipal umbrella organizations, the Council of State defines the reference sources for the parameters of structural needs equalization and other compensations.

3. The amounts listed in Articles 11, 12, 13, and 15 are indexed annually based on the consumer price index for the month of June of the year in question. The reference price index is that of June 2021.

1. Each municipality is obliged to provide the Department responsible for Local Government Finances [F] (hereinafter referred to as the Department) with the necessary data for the calculation of equalization, within the time limits set by the Department.

1. The department collects the data necessary for calculating the equalization payments for each municipality.

2. It annually publishes the updated parameters for the equalization of structural needs.

1. The department shall send to all municipalities each year a provisional statement for the coming year presenting

a. the provisional amount of the contribution to social cohesion payable by the municipality;

b. the provisional amount charged to the municipality under the Vaud Police Organization Act [G];

c. the provisional financial effects for the municipality of the equalization system provided for by this law, based on municipal data used for the last available final statement.

2. The Council of State shall determine the method of calculating the provisional amount of the contribution to social cohesion.

3. Along with the provisional statement, the department shall send to the municipalities the total advance payments due for the coming year. These payments cover all amounts related to the three elements mentioned in paragraph 1.

4. The Council of State shall set the periodicity of the advance payments.

1. Each year, the department sends the municipalities a final account for the previous year concerning the three elements mentioned in Article 22, paragraph 1.

1. Any subsequent corrections to the baseline data following the final settlement are taken into account in the preparation of the settlement for the year following the awareness of the new data.

1. In the event of non-payment of the installments or the amount invoiced following the establishment of the final account, late interest is charged by the department. The interest rate is set by the Council of State.

2. However, the department may waive the collection of interest when the municipality cites valid reasons.

1. Claims arising from this law are subject to a five-year statute of limitations from the date of notification of the final account.

1. In consideration for the management of equalization, the department receives a fee of CHF 450,000 per year.

2. It is deducted from the proceeds of cyclical levies before their distribution.

1. The equalization system established by this law shall be evaluated every five years, with the first evaluation occurring in 2031.

2. The Council of State shall appoint an external representative to conduct the evaluation.

3. The evaluation report shall be made public.

4. Based on the report, the Council of State shall consult with the umbrella associations of the municipalities and then propose any necessary adjustments to the system to the Grand Council.

1. The following are repealed by the present Act

a. the Act of 15 June 2010 on intermunicipal equalisations;

b. the Decree of 15 June 2010 laying down the detailed rules for the application of the Act on intermunicipal equalisations.

1. This law shall enter into force on January 1, 2025.

2. The Council of State is responsible for the execution of this law. It shall implement it in accordance with paragraph 1.