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Switzerland-Liechtenstein Sign Green Tax Treaty

Monday, March 8, 2010

The Swiss Federal Council has recently approved both the message and draft federal decree pertaining to the treaty on environmental taxes between Switzerland and Liechtenstein.

Under the terms of the new treaty, signed on January 29, Liechtenstein will apply the same environmental taxes as its Swiss neighbour.

In 1920, Switzerland and Liechtenstein created a common economic and monetary area. According to the Customs Treaty of 1923, Swiss customs legislation, and indeed other federal legislation connected to the customs union, are also applicable in Liechtenstein.

In a bid to protect the environment, Switzerland introduced in 1998 environmental taxes designed to encourage environmentally-friendly behaviour through financial and tax incentives for materials and products, notably organic compounds, “extra light” heating oil, as well as diesel. In 2008, Switzerland then elected to introduce a tax levied on carbon dioxide emissions resulting from the use of fossil fuels.

Although these environmental taxes are not related to customs tax, given the close economic relations between Switzerland and Liechtenstein, and in order to avoid unfair competition, both the Liechtenstein and Swiss government agreed that the taxes should be similarly applied in Liechtenstein.

The new Treaty provides the basis for the application of these environmental taxes, as a separate convention. Up until now, this was covered, as a temporary measure, under the Customs Treaty.

In application provisionally as from February 1, 2010, the new Treaty has yet to be approved by parliament, and is subject to an optional referendum on international treaties.