Brussels puts pressure on Switzerland over tax

Ambassador Reiterer has put the ball in Switzerland's court Keystone

The European Union's ambassador to Bern, Michael Reiterer, has said Switzerland must urgently come up with solutions to an ongoing tax dispute between the two sides.

He said that Switzerland was free to put forward its own plans to try to solve the problem but it could not simply sit it out.

Brussels and Bern have in particular been arguing over tax breaks offered by some Swiss cantons to foreign companies.

Reiterer made the comments in an interview with the Sonntag newspaper, ahead of a second meeting on the issue on Wednesday.

“Swiss Finance Minister Hans-Rudolf Merz is considering, as he says, how he can improve the Swiss tax system.”

“If he can incorporate something that helps the Swiss economy and at the same time resolves our problem, we will have found a solution – through dialogue,” he said.

Unwise

However, Reiterer commented it would be unwise if Switzerland did not wish to discuss solutions.

“It would be bad if Switzerland wants to talk only about issues that are in its own interests and not about the concerns of the EU.”

He said that while it was a priority for the Swiss to come up with a plan to try to solve the dispute, putting any solution into practice might take three to four years.

“But we have of course other common concerns, for example as regards agriculture.”

The Swiss government is to decide next month if it wants to negotiate a free trade on agriculture with Brussels.

“The EU Commission already has a mandate to negotiate. We are waiting now for Switzerland. A free trade accord on agriculture is an opportunity for Swiss farmers,” Reiterer argued.

Closer bilateral ties

Swiss Foreign Minister Micheline Calmy-Rey last week called for increased efforts to forge closer bilateral relations with the EU, a position she hammered home in an interview in the NZZ am Sonntag newspaper.

“We cannot simply do nothing,” she said, pointing out that that the EU was continually developing, while the bilateral agreements between Bern and Brussels remained static.

She warned the former Swiss justice minister, Christoph Blocher of the rightwing People’s Party, against launching a referendum against the extension of a labour accord to new EU members Romania and Bulgaria.

Calmy-Rey said linking the labour issue to Swiss fiscal sovereignty would be highly risky and would constitute an “own goal”.

“A no [vote] to our bilateral accords would inflict heavy damage on the Swiss economy,” she said.

Her view is not shared by Blocher, who argued in a speech on Friday that Switzerland could obtain enough foreign labour without extending the free movement of people to Romania and Bulgaria.

The Swiss held a first round of discussions on the tax dispute in November. Bern has insisted they are not negotiations.

swissinfo with agencies

In brief

Switzerland is not a member of the European Union.

The government sees EU membership as a long-term option.

Switzerland is linked to the EU via a series of bilateral accords and the EU is Switzerland’s main trading partner.

In the 1990s debate over Switzerland’s policy towards Europe polarised the national political landscape.

Switzerland has been granting financial aid to countries mainly in eastern Europe to help them transform into market economies.

As part of the second set of bilateral treaties with Brussels, Switzerland pledged to provide SFr1 billion ($0.91 billion) to the ten EU member states which joined the bloc in 2004.

It is also likely to pay about SFr300 million to Bulgaria and Romania.

Tax issue

Swiss position:

Switzerland believes that the 1972 free trade accord with the European Union does not apply to the tax benefits granted to foreign companies by a number of cantons.

It argues that the 1972 agreement is only applicable to certain goods (agricultural and industrial products).

Bern also says that when the agreement was signed, Switzerland and the European Community did not foresee harmonising their legislation. Bern also argues that the rules of the trade agreement must not be interpreted in the same way as internal EU regulations on competition.

EU position:

The European Commission says that tax privileges granted by some Swiss cantons to foreign companies are contrary to the 1972 accord.

The EU is calling on Switzerland to give up the tax practice and adapt to its demands.

The tax advantages in question concern foreign holding companies whose headquarters are in Switzerland but which make profits abroad.