French and Swiss to re-discuss tax agreement

Foreign minister Burkhalter hopes to have slowed down the pace on a new double taxation agreement with the French Keystone

Swiss Foreign Minister Didier Burkhalter and his French colleague Laurent Fabius have agreed to review a proposed double taxation agreement that many of Switzerland’s cantons have called unfair.

Speaking in Paris on Thursday after meeting Fabius, Burkhalter said that he explained to the French minister that the accord had met some resistance and that it would be good to have another round of talks before the Swiss government signed the agreement.

Criticism of the proposed treaty has focused on the fact that it would help France recover inheritance tax from its citizens living in Switzerland and force Swiss who own property in France to be taxed there.

The agreement would affect 2,000 French millionaires currently living in Switzerland but also many of the 170,000 Swiss expats living in France.

According to a draft text leaked to the Le Temps newspaper a few weeks ago, “when an heir…resides in France at the time the person passes away, and they have been a resident there for at least six of the last ten years before they received the assets, France will tax all the assets received by this person.”

Under France’s existing 1953 convention governing inheritance with Switzerland, a French-based heir of a person residing in Switzerland is taxed by the relevant Swiss canton – for example, between zero per cent for Geneva and seven per cent for Vaud.

A number of Swiss cantons have complained that the accord would impinge on their right to levy taxes and could lead to fiscal losses. They are now hoping the government will change its mind or that parliament will refuse to ratify the treaty.

Rubik accords

Burkhalter also defended the so-called Rubik accords with Britain, Germany and Austria, which regulate the previously non-declared, untaxed funds deposited by foreign nationals in Switzerland while preserving client anonymity.

France has so far rejected the idea of a bilateral accord with the Swiss concerning tax evasion, preferring an automatic data exchange as also demanded by the European Union.

The accord suggested by the Swiss Bankers Association would allow French residents who are account holders to remain anonymous, with the Swiss authorities levying a tax and passing on the proceeds to the French.

“Laurent Fabius listened to our position and said he would look at the issue,” said Burkhalter. However, the French, like the Swiss, would prefer talks to be handled at the EU level, even if the details of a possible accord would vary from country to country, according to the Swiss foreign minister.

Policy priority

Thursday’s visit to Paris is part of Switzerland’s revamped foreign policy priorities for the next four years, which focus specifically on neighbouring countries.

Burkhalter has already met his counterparts from European Union member states Germany, France, Italy and Austria at least once since taking up his post at the beginning of the year. Switzerland is not a member of the EU.

Critics point out that Burkhalter has not been able to leave his mark so far. But others argue this is not necessarily his fault.
 

So far, Finance Minister Eveline Widmer-Schlumpf has kept a much higher profile in the media trying to seek solutions to conflicts with Berlin, Rome and Paris over tax issues.

As to the dispute with the EU over the future of bilateral relations, some parliamentarians believe the ball is entirely in Brussels’ court, despite Burkhalter’s declarations of intent.

“Or the EU has so many other problems that Switzerland has dropped down the list of priorities regardless of the name of the Swiss foreign minister,” Christian Democratic parliamentarian Jacques Neirynck put it.

Opinions among representatives from different parties are divided over Burkhalter’s style. Compared with his predecessor Micheline Calmy-Rey’s penchant for extrovert appearances, he comes across to the public as low-profile and discreet, if not reserved.

French ties

Switzerland and France share a 600km common border and about 20% of the Swiss population, mainly in the west of the country have French as their mother tongue.

France is Switzerland’s third most important trading partner.

The biggest Swiss expat community lives in France, while a sizeable number of French citizens live or work in the Geneva and Basel regions of Switzerland.

Together with Germany, France and Switzerland also run the EuroAirport outside Basel.

Bilateral relations between the two countries have been strained notably about untaxed assets in Swiss bank accounts and a planned reform of an agreement on inheritance tax.

Negotiations are underway over closer cooperation with France on railway transport.

(With input from Olivier Pauchard)