Strasbourg, 26/04/2007 (Agence Europe) - On Thursday 26 April, the European Parliament and the Commission discussed relations between the European Union and Switzerland, that all participants considered excellent. The row between the Commission and Switzerland with regard to the cantonal taxation system was nonetheless at the heart of the debates. Mid-February, the Commission said some tax measures applying to three kinds of Swiss companies (management, joint and holding companies) by several Swiss cantons (Zoug, Schwyz) constitute state aid that is incompatible with the free trade agreement signed in 1972 between the EU and Switzerland (see EUROPE 9365). The Council's adoption of the Commission's negotiating brief in this affair is imminent. On Tuesday, the European Free Trade Association (EFTA) working group gave its go-ahead with abstention from Belgium, Luxembourg and Latvia, European sources say. The mandate appears on the agenda of the EU ambassadors' meeting on 2 May.
The Commission's February decision “caused a stir”, said European Economic and Monetary Affairs Commissioner Joaquin Almunia. He repeated the Commission's arguments that Swiss cantonal tax privileges are a form of “subsidy” running counter to European rules on state aid and giving tax advantages to companies established in Switzerland while making profits in the European Union. There are “over 20,000 'letter box' companies whose sole aim is to evade taxation”, he went on to add. Restating the Commission's position in favour of tax competition on condition that it is “fair”, Mr Almunia said the matter discussed “since 2005” concerns the way the 1972 agreement functions and not competition. Furthermore, he hoped negotiations would soon begin on the participation of Bulgarian and Romanian citizens in the EU/Switzerland agreement on the free movement of persons, as well as on the Swiss Confederation's financial contribution to the economic and social development of these two countries (see EUROPE 9315). The Commission, he pointed out, is willing to examine the Swiss proposal to improve the way bilateral agreements between the EU and Switzerland work through a “general framework agreement”, on condition that this brings added value.
Speaking on behalf of the EPP-ED Group, German Christian Democrat Andreas Schwab welcomed the “Commission's declarations that will have the support of (his) group”. He recalled that Switzerland is “a very important trade and economic partner”, in fact the second largest European export market after the United States. In his view, the row over Swiss cantonal tax policy is not interference on the Commission's part in Swiss national tax policy, contrary to what some “British colleagues” believe. The MEP called for “equal treatment” and said it was necessary to prevent “covert aid that should be abolished at all cost”.
The EP Socialist group is on the same wavelength. French Socialist Pervenche Berès promised her group's full support in this affair. She took the view that the tax rules in force in the cantons of Zoug, Vaud and Schwyz are in “violation of the 1972 agreement on the forms of state aid” that affect “healthy competition” and the “nature of trade”. “You can't have your cake - the internal market - and eat it too - the exception of a number of Swiss cantons”, she said. The French Socialist spoke of the “considerable sums” at stake, alluding to the attempts of “natural persons” - for example the singer, Johnny Hallyday - to set up a tax free haven for themselves in Switzerland. She went on to speak of the attitude adopted by the Swiss Confederation, which “caused division in order to reign among Europeans” during savings tax negotiations.
The ALDE group is opposed to the Commission's approach. Diana Wallis (ALDE, UK) said that “either you are a member of the EU, or you are not” and, “as Switzerland is not” it is “not subject to all the obligations” arising from EU membership. On the tax row with Switzerland, she suspected the Commission of wanting to “extend the voluntary code of conduct” on taxation that is detrimental when it comes to corporate taxation, when it does not even show an interest in “offshore tax arrangements” in place in some member states. The chairperson of the EP delegation for relations with Switzerland also expressed surprise at the fact that the Commission compares the Swiss cantonal tax system to a “predator” system without giving any concrete examples. Citing Switzerland as a model of democracy and freedom, Mario Borghezio (UEN, Italy) slammed the “tax dictatorship” within the EU and in particular the “oppression of Italian taxpayers”. Noting the originality of the Swiss Confederation as an “island” in the middle of the EU, Mieczylaw Edmund Janowski (UEN, Poland) welcomed the Swiss contribution to the economic and social development of the new member states. Switzerland does better than the EU because it takes its decisions “as close as possible to its citizens”, said Daniel Hannan (EPP-ED, UK), convinced that Europeans are in fact “jealous” of Switzerland's success. (mb)