In Switzerland, cantons are free to set their own tax rates within the framework of the 2001 Tax Harmonisation Act. This allows cantons to compete to attract foreign companies, and the country has gained a reputation for attracting wealthy foreign celebrities and business persons with special tax deals.

However, in a letter sent to the Swiss Mission in Brussels in October, the European Union suggested that certain parts of the Swiss corporate tax regime "may be incompatible" with Switzerland's obligations under the 1972 Free Trade Agreement between Switzerland and the European Union.

The EU specifically took issue with legislation in place in cantons Zug and Schwyz which it said "grant fiscal advantage to undertakings for... economic activities taking place outside Switzerland".

In response, the head of the Swiss Mission in Brussels, Bernhard Marfurt, sent a three-page letter to European officials ahead of the talks which refutes the EC's claims. The letter also appeals for more specific details of which cantonal practices allegedly contravene the trade agreement.

The small central Swiss canton of Obwalden has become the latest to compete for business and investment after voters approved a cut in corporate tax to 6.6% from January 1- the lowest in Switzerland - in addition to reductions in tax on personal income.