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Calmy-Rey hits back at French tax attack

New President Calmy-Rey defended Switzerland Keystone

President Micheline Calmy-Rey has dismissed a French demand for the European Union to crack down on Swiss tax breaks for foreign individuals and firms.

This content was published on January 6, 2007 - 13:05

Speaking on Swiss television on Friday night, Calmy-Rey called for more "respect" following comments from a key ally of French presidential candidate Ségolène Royal.

Earlier this week French socialist politician, and spokesman for Royal, Arnaud Montebourg likened Switzerland's cantonal tax system to "banditry". He urged the EU to crack down on cantons that set low tax rates to entice companies and individuals to relocate from other countries.

French pop legend Johnny Hallyday recently announced his intention to move to Switzerland to avoid the burdensome tax regime of his home country. His decision moved the tax debate to the top of the French presidential election agenda.

But Calmy-Rey hit back at Montebourg's criticism in a television interview. "The Swiss tax rules are transparent. It is up to the Swiss voters to decide if they should be changed. We don't need any advice," she said.

Ongoing dispute

The Social Democrat politician pointed out that more than 100,000 French citizens cross the border every day to work in Switzerland. She added that Switzerland collected some SFr300 million ($243 million) in taxes for the EU last year despite not being a member state.

Furthermore, Switzerland was the EU's second-largest customer with a negative trade balance with the community, Calmy-Rey said.

Switzerland has been embroiled in a corporate tax dispute with the EU since September 2005. Many EU countries are angry that tax revenues are being lost as companies relocate to Switzerland to take advantage of lower levies.

On Thursday US company Kraft, the world's second-largest food producer behind Switzerland's Nestlé, said it would relocate its European headquarters to Zurich from London and Vienna.

The EU argues that the low tax regime violates the terms of a 1972 Free Trade Agreement, but Switzerland has vigorously denied this claim.

Several high level meetings between EU and Swiss representatives have so far failed to reach an agreement, with the dispute set to drag on.

swissinfo with agencies

In brief

Swiss cantons are free to set their own tax rates within the framework of the Tax Harmonisation Act, brought into force in 2001.

Selected cantonal tax rates from a KPMG report published on November 1, 2006: Obwalden 13.1%, Schwyz 15.6%, Zug 16.4%, Zurich 21.3%, Graubünden 29.1%.

Article 23.iii of the 1972 Free Trade Agreement states that: "any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods" is "incompatible with the proper functioning of the Agreement".

Micheline Calmy-Rey took up the rotating Swiss presidency on January 1. She is also Switzerland's foreign minister.

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