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Switzerland, EU Discuss Tax

Thursday, March 22, 2012

Swiss President Eveline Widmer-Schlumpf and Federal Councillor Burkhalter have recently met with top European Union representatives within the scope of a working visit in Brussels, with the discussions focussing on current developments in bilateral relations and in particular on strengthening cooperation in the area of taxation.

The topic of taxation was discussed by President Widmer-Schlumpf, the President of the European Commission, José Manuel Barroso, the President of the European Council, Herman Van Rompuy, and the EU Commissioner for Taxation, Algirdas Šemeta. At the meeting, Switzerland and the EU agreed to intensify cooperation relating to tax issues and to establish a formal dialogue in the area of company taxation.

The system of company taxation in Switzerland has been a long-running source of friction between Berne and Brussels, with the EU claiming that certain cantonal company tax arrangements are incompatible with the 1972 Swiss-EU Free Trade Agreement - a notion that the Swiss government firmly rejects. A series of talks between Commission officials and the Swiss federal government fizzled out in 2007/2008, with both sides effectively agreeing to disagree on the main points at issue. Nonetheless, the breakdown in talks merely reinforced Switzerland's view that it has no case to answer with regards the compatibility of its tax system with EU law, with the Federal Department of Finance stating that: "Switzerland rejects negotiations with the EU".

The Swiss government also declared that it was prepared to examine the possibility of a framework agreement between itself and the EU on withholding tax on savings income within the context of new bilateral arrangements between Switzerland and certain EU member states, including Germany and the UK, aimed at 'regularizing' undeclared Swiss bank accounts.

The European Commission argues that the tax deals undermine the objective of the Savings Tax Directive, a mechanism which allows member states to tax certain investments held by residents in other member states and certain third countries, including Switzerland. Opposed to the anonymity provision, the Commission is also continuing to strive for an automatic exchange of tax information.