Representatives from Switzerland and the European Commission on Wednesday resumed a dialogue on the EU's assessment of certain cantonal company tax arrangements.
The meeting, which took place in Brussels, was the second round of talks on a tax dispute which erupted last year when the European Commission threatened to launch legal proceedings against Switzerland, ostensibly in an attempt to bring it into compliance with the 1972 Free Trade Agreement between the European Community and the Swiss Confederation.
The EU has claimed that it expects "movement" from the Swiss on the issue by the next meeting in April. However, Switzerland's version of events appears to be somewhat different, with a Federal Finance Department statement explaining that: "The second round of dialogue led to a better understanding of the respective viewpoints but without achieving convergence."
According to this statement, the second set of technical discussions seemed to follow a similar pattern to the initial talks on the matter, which were held in November 2007: firstly, the Swiss delegation rejected the applicability of the 1972 agreement between the EC and Switzerland to the cantonal company taxation regulations in question; secondly, the EU interpretation that the tax regime in question restricts trade in goods between Switzerland and the EU or in some cases distorts competition was challenged; and thirdly, the Swiss emphasised that domestic and foreign revenues are taxed in the same way, and are therefore not discriminatory, as claimed by the EU.
The European Commission considers certain cantonal tax arrangements for holding companies, as well as joint enterprises and management companies, to be forms of state aid which are not compatible with the 1972 Free Trade Agreement.
On 13th February 2007, the European Commission requested a mandate from the Council to start negotiations with Switzerland. This mandate was approved by the Council on 4th May 2007.
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