The First Industrial Age (1834–1939) — conclusion

Conclusion of Part A

Part A has followed the canton of Zug from its medieval origins to the eve of the Second World War. The picture that emerges differs sharply from that of Geneva. Zug had no Reformation, no refuge, no banking tradition and no international organisations. It was a small, Catholic, agrarian canton, governed by a federation of the town and three rural communes, whose elite lived from mercenary service and foreign pensions. Its entry into the modern world was imposed from outside, by the French armies of 1798, by the Act of Mediation of 1803 and by the federal victory of 1847, to which the canton adapted pragmatically each time.

Several threads nonetheless run from this history to the modern business location. The political culture of negotiation and compromise, formed in the federation of town and Amt and refined in the proportional democracy of 1894, supported the stable, consensual fiscal policy of the twentieth century. The experience of foreign money, in the form of pensions and military pay, taught the canton both the value of income from abroad and the conflicts it can cause. The corporations, as owners of communal property, remain significant actors in a canton where land is scarce. The federal constitution of 1848 left direct taxation to the cantons and thereby made cantonal tax competition possible. The railway connected Zug with Zurich, Lucerne and the Gotthard and made its proximity to Zurich an economic asset. And the industrial age brought the first foreign entrepreneurs, the first multinational enterprise, the first large inflows of workers from other cantons and from abroad, and home-grown enterprises such as Landis & Gyr and the Metallwarenfabrik that grew into international groups.

Building on these foundations, the tax turn that began in the interwar years came, like the mercenary service of earlier centuries, as a response to the vulnerability of a small canton that had to make its living in a world shaped by others. Part B examines how that turn was made.

In five sentences

1. Zug was a small, Catholic, agrarian canton, governed until 1848 by a federation of the town and the three rural communes of Baar, Ägeri and Menzingen, whose elite lived for three centuries from mercenary service and the pensions of foreign crowns.

2. The quarrels over the distribution of those pensions, above all the Harten- und Lindenhandel of the eighteenth century, anticipate the modern debates over the distribution of the benefits of a low-tax policy.

3. The Federal Constitution of 1848 left direct taxation to the cantons within a unified legal and economic space, a division of powers that is the constitutional foundation of cantonal tax competition.

4. The industrial age, from the spinning mills of the 1830s to Landis & Gyr and the Metallwarenfabrik, brought foreign entrepreneurs, a first global enterprise in the Anglo-Swiss Condensed Milk Company, and large numbers of workers from other cantons and from Italy.

5. Because the first tax incentives of 1921 and 1930 came out of industrial crisis, the tax turn of the twentieth century began as a response to vulnerability, in the tradition of a small canton that had always made its living by being useful to others.

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.