Switzerland’s long-running corporate tax spat with the European Union looks like it could soon be over. EU Finance Ministers on Friday adopted a joint declaration outlining an agreement reached with Switzerland over its ‘harmful’ tax regimes.
According to the declaration, Bern has agreed to end certain company tax measures regarded as ‘harmful’ as part of its reform of corporate tax rules. The cabinet will ask parliament and interested parties in Switzerland to consult the proposals after summer.
“In return, the EU member states confirm their intention to lift corresponding countermeasures as soon as the regimes in question have been abolished,” the Swiss authorities said.
They added that “the reform should allow the Swiss tax system to develop and strengthen the competitiveness of the Swiss economy while taking into account international changes”.
Switzerland has been forced by the EU to rethink its generous corporate tax code after years of pressure. In 2011 an EU finance working group identified five Swiss company tax measures which it regarded as harmful.
At the cantonal level Brussels has criticized Switzerland’s tax perks for holdings, as well as domicile and mixed companies. At the federal level it has been critical of Swiss-based headquarters and branches of multinationals as well as companies active as “Swiss finance branches”.
In particular the EU has been demanding that cantons remove “discriminatory” tax breaks on the overseas earnings of foreign firms and apply the same rate as domestic profits.
Talks between officials from the European Commission and Swiss officials lasted between 2012 and June 2014.
Despite the EU’s latest conciliatory declaration, several EU member states have expressed fears that Switzerland may introduce new ‘harmful’ tax regimes to compensate for the enforced changes.
For its part Switzerland has failed to gain full guarantees that halting certain company tax measures will end EU sanctions.