Representatives from Switzerland and the European Commission met in Bern on
Tuesday for a third round of dialogue on the EU's assessment of certain cantonal
company taxation arrangements.
According to the Swiss Federal Department of Finance, the most recent round
of talks "further contributed to improving the mutual understanding of
the respective positions" of both sides.
However, it was agreed that no
date would be set for a further round of meetings, suggesting that the impasse between
Bern and Brussels on the vexed question of taxation remains.
The third round of discussions focused, much like the previous two rounds,
on the question of whether the 1972 Free Trade Agreement between Switzerland
and the European Community was applicable with regard to certain cantonal company
taxation regulations.
The Swiss continued to argue that this "is by no
means the case," and that the country has no obligation to adapt or even
do away with these regulations. Following the discussion, the Finance Department
confirmed, somewhat unsurprisingly, that: "Diverging positions remain in
this regard."
The European Commission considers certain cantonal company taxation arrangements
for mixed and holding companies to be forms of state aid which are not compatible
with the 1972 Free Trade Agreement. In its decision of February 13th 2007, it
requested a mandate from the Council to take up negotiations with Switzerland.
The mandate was adopted by the Council on May 4th, 2007.
The Swiss Federal Council has consistently rejected the EU's interpretation,
considering it to be unfounded, and has consequently refused to enter into negotiations.
The Federal Council holds the view that:
- The tax provisions criticised by the EU do not fall within the scope of
the Free Trade Agreement (The Free Trade Agreement only covers trade in certain
goods and does not aim to harmonise competition law);
- Switzerland is not an EU member, or part of the Single European Market,
and that therefore neither the competition regulations of the EC Treaty -
in particular those on state aid - nor the code of conduct agreed between
the EU member states on company taxation are applicable to it;
- The tax provisions criticised - even if they were covered by the FTA -
do not represent state aid as they do not favour certain companies or sectors
of production, but are in fact open to all economic actors that meet the legal
criteria;
- The provisions do not prejudice the bilateral trade in goods between Switzerland
and the EU because the types of company concerned in Switzerland have no,
or at most subordinate, business operations which are taxed normally.
The Swiss delegation also informed the EU representatives of reform steps
initiated by Federal Councillor Hans-Rudolf Merz, following the vote on the
second series of corporate tax reforms intended to strengthen Switzerland's
position in terms of international tax competition.
While the EU representatives
"noted with interest" that the relevant tax reform working group may
take certain EU concerns into account in its considerations, the Swiss delegation
stressed that the cantonal tax systems as such would not be included. Initial
results of the working group deliberations are not expected before autumn 2008.
While Switzerland told the EU that its tax laws are not up for negotiation,
the Federal Council has nevertheless stated that it is willing to hold a dialogue
with the EU on the matter, and an initial meeting was held in Bern on November 12th,
2007, followed by a second meeting in Brussels on January 23rd, 2008.
"The aim of this dialogue is not to prepare the ground for negotiations,
but to engage in a thorough discussion and clarification of mutual positions,"
the Swiss Finance Department explained, going on to suggest that this goal "was
largely achieved over the course of the previous meetings".
"It was therefore agreed by both sides that no date would be set for a
further meeting at the present time," the Swiss government stated.
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