Brussels Opens Communication Line To Switzerland And Liechtenstein

by Ulrika Lomas, Tax-News.com, Brussels

03 April 2007

The European Commissioner for External Relations and Neighbourhood Policy, Benita Ferrero-Waldner, has made her first official visit to Switzerland and Liechtenstein as the EC opens an official presence in the Swiss capital, Bern, in an attempt to patch up fractious relations between Brussels and the Swiss government.

The opening of the European Commission delegation in Bern, today (April 3) has been described by the EC as a "key event" that will "further develop the already exceptionally good and multifaceted relations," although the Commission's statement hides the fact that a rift has widened between the EC and Switerland over the latter's tax system. The head of delegation in Bern will be accredited to both Switzerland and Liechtenstein.

"Since taking office, I have lobbied for a delegation in Bern. We have close cultural and economic ties with Switzerland and a multitude of bilateral agreements and political links to look after," Ferrero-Waldner commented.

"We have, in Ambassador Michael Reiterer, a good man in Bern. I am convinced that he will make a great contribution to enhancing understanding between the parties," she added.

The two-day series of talks between Ferrero-Waldner and the governments of Switzerland and Liechtenstein are focusing on bilateral relations, EU enlargement and international issues. Ferrero-Waldner has already met with Prince Alois of Liechtenstein, and the principality's Minister for Foreign Affairs, Rita Kieber-Beck.

The Commissioner is also having meetings with Switzerland's President and Minister for Foreign Affairs, Micheline Calmy-Rey, for political discussions on bilateral relations and on key international political issues. A meeting has also been scheduled with members of the Foreign Affairs Committees of the Swiss National Council and Council of States.

Relations between Bern and Brussels have become increasingly strained in recent months as the European Commission prepares to take action against Switzerland over certain aspects of its company taxation system. According to the EC, cantonal company tax regimes in favour of holding, mixed and management companies are a form of 'state aid' incompatible with the proper functioning of the 1972 Free Trade Agreement between the EU and Switzerland. The Commission is asking Switzerland to amend these tax schemes and bring them in line with the terms of the trade agreement.

However, in its official response to the EC's complaint last February, the Swiss government reiterated its long-held view that no contractual regulations exist between Switzerland and the European Union on the harmonisation of company taxation and that consequently, it is not possible for there to be an infringement of any agreement.

"This applies in particular to the Free Trade Agreement," Bern has stated, arguing that this agreement only covers trade in certain goods, and does not provide a sufficient basis for judging company taxation, in particular concerning distortion of competition.

Moreover, the Swiss government has emphasised the fact that it is not part of the Single European Market, so neither the rules on competition in the EC Treaty - amongst others the rules on state aid - nor the code of conduct on company taxation agreed amongst EU member states are applicable to Switzerland.

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