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Swiss to discuss new tax accord with Japan

Swiss president Joseph Deiss presents a gift to Japanese Prime Minister Junichiro Koizumi Keystone

Switzerland and Japan are set to renegotiate a key double taxation accord, which currently penalises Swiss companies.

Japanese finance minister Sadakazu Tanigaki agreed to re-examine the issue during talks on Wednesday with Swiss President Joseph Deiss.

A spokesman for the Swiss economics ministry said on Wednesday that Deiss now intended to invite a Japanese delegation to Switzerland in January to discuss technical details of a revised accord.

Japan has recently reached a new double taxation agreement with the United States, under which reciprocal licence fee payments are exempted from tax.

The existing system effectively penalises Swiss companies, which are subject to a ten per cent tax on similar fees.

European Union firms currently pay five per cent.

Deiss said this imbalance was a good reason to renegotiate the current accord, dating back to 1971.

The 1971 accord already contains a provision for Japan and Switzerland to accord each other “most favoured nation” trade status – which should, at least in theory, spell an end to anomalies such as double taxation.

Not top priority

Deiss also held talks on Tuesday with Japanese Prime Minister Junichiro Koizumi, on issues including technical and research cooperation and direct investment.

Koizumi said afterwards that he shared the Swiss view that existing cooperation efforts, particularly in the areas of biotechnology and nanotechnology, should be extended, but gave few concrete details.

The two men also discussed the outlines of a possible bilateral free-trade agreement, although Deiss made it clear at a media briefing on Tuesday that Switzerland was “not priority number one” for Japan in this respect.

Deiss is being accompanied during his six-day trip by a delegation including Pierre Mirabaud, chairman of the Swiss Bankers’ Association, and Ueli Forster, president of the Swiss Business Federation, economiesuisse.

“We hope that more Japanese companies will choose Switzerland for investment in Europe,” Deiss told swissinfo shortly before his meeting with Koizumi.

Swiss direct investment in Japan totalled SFr7.9 billion ($6.3 billion) in 2002, but investments in Switzerland by the world’s second-largest economy were worth only SFr1.1 billion.

Political commentators point out that, while the discussions – part of the first official visit to Japan by a Swiss president since 1996 – represent an important step forward, little concrete has yet been achieved.

“Le Temps” newspaper said: “The Swiss came to Tokyo to promote mutual investment and, if possible, to launch discussions about a future free-trade agreement. They will leave empty-handed on both counts.”

Japan is Switzerland’s most important trading partner in Asia, with Swiss exports totalling SFr5.14 billion in 2003 and Japanese imports worth roughly half that figure – SFr2.64 billion.

About 140 Swiss companies are directly represented in Japan, but Deiss says there are still plenty of opportunities to increase both mutual direct investment and other trade ties.

swissinfo with agencies

The Swiss president, Joseph Deiss, and the Japanese finance minister, Sadakazu Tanigaki, have agreed to renegotiate a key double taxation accord.

Deiss also met prime minister Kunichiro Koizumi for talks on issues including direct investment.

The two sides announced progress on several other issues, but gave few details.

Japan is Switzerland’s third-largest trade partner after the United States and the European Union.
Swiss exports to Japan totalled SFr5.14 billion ($4.06 billion) in 2003, while Japanese imports came to SFr2.64 billion.
Swiss direct investment in Japan totalled SFr7.9 billion in 2002, but Japanese investments were worth only SFr1.1 billion.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR