The Italian-speaking canton of Ticino says it will temporarily block some tax at source revenues belonging to Italian cross-border workers.
The move is a way of putting pressure on the Swiss government to resolve an ongoing tax dispute with neighbouring Italy.
More than half of the amount of money which should go to Italy – around SFr30 million ($36 million) – is to be frozen in a Swiss bank account. It will stay there until the Swiss government starts negotiations with Italy over a new double taxation agreement, agreed the cantonal government on Thursday evening.
The Swiss finance ministry said that it had taken note of Ticino’s decision and that it was also interested in an end to the tax dispute. Spokesman Mario Tuor told the Swiss news agency that the two sides may restart talks next week.
Switzerland has come under pressure from its neighbours to crack down on tax dodgers and abolish its traditional banking secrecy. Italy, led by Finance Minister Giulio Tremonti, has been particularly vociferous, particularly because Switzerland does not want to include the automatic exchange of information about bank clients in any agreement.
Italy has retained Switzerland on its own black list of tax havens despite the Organisation for Economic Co-operation and Development having cleared the Swiss 18 months ago. As a result, Italy has increased the amount of red tape for Swiss companies, making it harder for them to do cross-border business.