(Nov. 2, 2007) The Swiss Canton of Obwalden is in the process of introducing a flat rate tax on individual incomes, to be applied for the first time in the tax year 2008. The bill has passed the first reading in the cantonal parliament and has to pass another parliamentary reading and a referendum in order to become enacted (Obwalden will 2008 die "Flat Rate Tax" einführen, NZZ ONLINE, Sept. 24, 2007). The flat rate tax would be applied at the cantonal level while allowing the municipalities to determine their own tax rate. The reform purports to attract residents by lowering the level of taxation and by making the tax laws more transparent. (Id.)
The cantonal government decided to introduce the flat tax rate bill after a judgment of the Federal Court of June 1, 2007 (docket number 2P.43/2006) struck down a previous Obwalden tax reform that applied degressive tax rates by lowering the cantonal income tax rate for annual incomes in excess of Swiss Francs 300,000 (US$255,698). The Court held that the degressive tax rates violated article 127 of the Swiss Constitution (Bundesverfassung der schweizerischen Eidgenossenschaft of April 18, 1999, SYSTEMATISCHE SAMMLUNG DES BUNDESRECHTS No. 101, (last visited Oct. 25, 2007). This article requires that taxes be imposed in accordance with the economic capacity of the taxpayer.