Swiss give EU short shrift in tax stand-off

Ambühl said the Swiss position was clear swissinfo.ch

A senior Swiss diplomat has reiterated comments by the foreign minister that Switzerland will not give ground to the European Union over the country's tax system.

Speaking in Geneva on Monday, Michael Ambühl said the practice whereby some Swiss cantons slash taxes to attract foreign businesses did not violate a free-trade accord with Brussels.

“Our position is absolutely clear… that the cantonal taxes do not constitute a subsidy – indirect or direct – to the exchange of goods, and as such do not affect the free-trade agreement,” he said.

Ambühl’s comments follow a similar hardline stance taken by Swiss Foreign Minister Micheline Calmy-Rey in a Sunday newspaper interview.

She told the SonntagsZeitung that there was simply no basis for discussion on what the head of the European Commission, José Manuel Barroso, has described as “a discriminatory tax regime, which is contrary to the rules of the EU’s internal market”.

“There is no connection between our tax system and the free-trade accord, as the EU commission claims. In our view there is absolutely no room for negotiation,” she said.

EU challenge

According to the EU, privileges offered to companies by some cantons violate the 1972 free-trade agreement between Bern and Brussels.

Switzerland, which is not a member of the EU, sees no connection between the agreement, which covers trade, and tax practices.

In her newspaper interview, the Swiss foreign minister did little to correct the view that Bern is on a collision course with Brussels over the issue.

She even voiced her irritation that the EU was stirring up trouble shortly after Swiss voters had approved a SFr1 billion ($840 million) contribution to the ten new member states.

The issue of corporate tax privileges also arose during talks in Brussels last week between Calmy-Rey and EU Commissioner for External Relations Benita Ferrero-Waldner. The meeting ended with both sides sticking to their different positions.

The subject is expected to be broached again when the joint committee on the free-trade agreement sits in Brussels on December 14.

Foreign policy

Presenting Switzerland’s foreign policy priorities in Geneva, Ambühl said the EU was the country’s most important partner and that a sustainable relationship with Brussels was paramount.

Non-EU member Switzerland signed two sets of bilateral accords in 2000 and 2004, covering 16 areas.

Ambühl signalled that future negotiations on bilateral ties could include liberalisation of the electricity market, Swiss participation in the Galileo satellite programme and the renewal of agreements on research and the media.

He noted that the so-called bilateral way now appeared to have the “full support” of the population, following the successful outcome of four recent referenda on EU affairs.

swissinfo, Adam Beaumont in Geneva

Key facts

1972: Switzerland and the European Community sign a free-trade agreement.
1992: Bern lodges an application for membership of the European Union. In the same year, the people reject membership of the European Economic Area.
2002: the first package of bilateral agreements with the European Union comes into force.
2004: Bern and Brussels sign a second package of measures.

In brief

Switzerland’s competitive tax system has come under the scrutiny of the European Commission, which questions whether tax breaks attracting foreign companies contravene the 1972 free-trade agreement.

The EU’s code of conduct forbids member states from luring foreign companies with lower taxes than those offered to domestic firms. Non-EU member Switzerland has not signed this code.

Brussels is now playing the free-trade agreement card and calls the tax breaks state subsidies.