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Semeta Issues Tax Ultimatum To Switzerland

by Ulrika Lomas,, Brussels

23 January 2013

Drawing sharp criticism from Switzerland, European Union (EU) Tax Commissioner Algirdas Semeta has warned that the Confederation has six months in which to amend its company tax arrangements currently favoring foreign companies.

In his ultimatum, Semeta warned that the Confederation will be placed on the so-called "black list" of jurisdictions deemed uncooperative in tax matters if it fails to comply.

European Union finance ministers announced at the beginning of December last year that they intend to see Switzerland make concrete progress in the area of corporate taxation by June 2013.

Reiterating this demand, Semeta highlighted the fact that the EU is constantly striving to amend or to abolish harmful tax practices, insisting that it expects nothing less from Switzerland. If progress is made during the talks then Switzerland will avoid being placed on the black list, he explained.

While maintaining that the EU is not against tax competition, Semeta stressed that this must be fair. The EU code of conduct requires domestic and foreign companies to be treated the same, Semeta continued, emphasizing that the problem in Switzerland is that some Swiss cantons give preferential tax treatment to foreign firms compared to domestic corporations.

Swiss Finance Minister Eveline Widmer-Schlumpf fiercely criticized the Commissioner’s latest attack, underscoring that this is not the manner in which to deal "with good treaty partners."

Constantly issuing threats and ultimatums is not the way to achieve results, the minister added, pointing out that Switzerland is currently engaged in a constructive dialogue with the EU and has already put forward proposals for discussion.

Although Switzerland is not a member of the EU, the European Commission nevertheless considers certain cantonal company taxation arrangements for holding companies to be forms of state aid, which are not compatible with the 1972 Free Trade Agreement. In its decision of February 13, 2007, it requested a mandate from the Council to take up negotiations with Switzerland. The mandate was adopted by the Council on May 4, 2007.

Although the Swiss Federal Council has consistently rejected the EU's interpretation, considering it to be unfounded, it has recently entered into negotiations to resolve the matter.

TAGS: tax | business | European Commission | free trade agreement (FTA) | law | corporation tax | agreements | Switzerland | trade | European Union (EU) | Europe

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