Link to Ralph Atkins’s October 26, 2016 Financial Times article “Switzerland enjoys negative interest rates windfall: Taxpayers settle bills early and bond investors pay to lend money to government”

In “Swiss Pioneers! The Swiss as the Vanguard for Negative Interest Rates” I wrote:

there is no question that negative interest rates will require many detailed adjustments in how banks and other financial firms conduct their business. Like it or not, Swiss banks and the rest of the Swiss financial industry may be forced to lead the way in figuring out these adjustments, just as the Swiss National Bank is leading the way in figuring out how to conduct negative interest rate policy. The Swiss are eminently qualified for that pioneering role. The rest of the world would be well-advised to watch closely.

Some of the adjustments that need to be made in a negative rate environment are to the tax system. Recently, Swiss cantonal governments and the Swiss federal government have realized they can lower incentives for early tax payments, since low interest rates on other accounts provide an incentive to pay taxes early. Here are the two passages I found most interesting for the details reported:

Although Swiss retail banks have largely shielded ordinary bank customers from negative interest rates, companies face penalties for holding large amounts of cash. That has increased the appeal of incentives traditionally offered by Swiss cantons as well as the federal government for early tax payments.

Companies entitled to tax rebates had also waited to reclaim funds from the state, the finance ministry in Bern said. …

The federal government is not only enjoying a boost to its finances [from negative interest rates on its bonds up to a 20-year maturity]. It does not have to worry about paying charges on cash accounts either: it is specifically excluded from the negative interest rates imposed by the SNB, which acts as its banker.

All of these issues were quite predictable, but it is fascinating to see them actually playing out. This example is important because it indicates that some of the steps necessary to eliminate the zero lower bound that are not within the authority of central banks might be handled in a reactive way by other arms of government. 

Thanks to Ruchir Agarwal for pointing me to this article.