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Merz Seeks To Mend Tax Relations With Italy

by Ulrika Lomas,, Brussels

09 November 2009

In a bid to resolve the ongoing dispute with Italy over tax policy, Switzerland’s President Hans-Rudolf Merz has set up an inter-departmental working group to draw up a joint strategy.

Merz recently suspended all negotiations with Italy on a double taxation agreement (DTA), following the announcement of investigative action against branches of Swiss banks in Italy.

According to the Swiss Federal Finance Department, Switzerland has for years endeavored to find a solution to the unresolved tax policy issues with Italy, and in particular to the - in its view - unjustified charges made by Italy.

The appointment of a working group is, in the words of the Federal Department of Finance, Switzerland's attempt to "prevent any further escalation in relations between Italy and Switzerland in the area of taxes".

The working group is made up of representatives from the Federal Department of Finance, the Federal Department of Foreign Affairs and the Federal Department of Economic Affairs, and will be led by the Director of the Federal Tax Administration, Urs Ursprung.

Negotiations on the revision of the DTA with Italy have been in progress since 2001. In 2007, the Italian government submitted a proposal for signature, containing a ruling on the exchange of information (tax fraud and similar offences). However, according to the Swiss, the Italians subsequently suspended negotiations.

The Swiss authorities announced in a statement that: "Following Italy’s decision in June 2009 to resume DTA talks, two rounds of negotiations took place in July and September of this year. Here the Swiss delegation called for Switzerland to be removed from all black lists and to be placed on the new white list."

"Once again the negotiating teams failed to reach a conclusion, mainly due to political reasons, and agreed to continue the negotiations dealing with individual points."

"Italy has for several years been listing Switzerland on various tax blacklists because of the taxation of privileged companies in accordance with Art. 28 of the Federal Act on the Harmonization of Direct Taxation at Cantonal and Communal Levels, which compared to Italy has lower levels of normal taxation and... a lack of information exchange."

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