Swiss-EU bilateral relations to be tested

European Union leaders will have a busy year ahead Reuters

A wholesale change at the top of the European Commission and the entry into force of the Lisbon Treaty present a new set of challenges for Swiss-European relations.

For the next eight days the European Parliament is holding a series of public hearings with the 26 candidate Commissioners in Brussels. Swiss diplomats will be watching closely to see how the new Commission will deal with the thorny subject of tax.

Ahead of the parliamentary grilling, the incoming European commissioners already provided written answers to some of the parliamentarians’ questions.

The word Switzerland may not figure in any of those responses, in which commissioners outline their priorities to the end of 2014, but that does not mean that there are no implications for the country.

“Strategic partner”

First hint: the Commission wants to reinforce cooperation between the EU and its principal political and commercial “strategic partners”. The head of the EU’s diplomatic service, Britain’s Catherine Ashton, and trade commissioner Karel de Gucht from Belgium both insist on that necessity, listing a number of countries from the United States and Ukraine, to India to Brazil.

As for Switzerland, the question of the conclusion of a vast framework accord with Bern was raised by three key countries in December 2009.

Spain, Belgium and Hungary, who will hold the rotating EU presidency between now and mid 2011, made reference to it in the document outlining their own priorities.

Take the initiative

“I don’t see the European Commission remaining passive,” lawyer Jean Russotto, one of the leading specialists on Swiss-EU relations in Brussels, told swissinfo.ch.

“If Switzerland does not take the initiative in rebuilding relations with the EU, Brussels could well impose a certain discipline from its side.”

One key bone of contention is competition – and therefore state support – which is at the origin of the row over company tax regimes in certain cantons.

The new commissioners all profess to have an appetite for introducing new legislation, not least in the internal affairs and justice portfolios where commissioners have new powers since the entry into force of the Lisbon Treaty on December 1, 2009.

As a member of the Schengen area and associate of the Dublin Convention, Switzerland cannot afford to remain aloof.

The new commissioner for internal affairs, the Swede Cecilia Malmström, aims to establish a common asylum system and to put in place a common EU immigration policy – a sensitive subject in Switzerland.

At the same time she wants to reinforce security, including boosting the role of the European Agency for the Management of Operational Cooperation at the External Borders (Frontex), in which Switzerland participates.

Tightening the screws

Luxembourg commissioner Viviane Reding who has taken over the portfolio of justice, fundamental rights and citizenship, intends to put emphasis on removing obstacles to the free movement of people and creating a European civil code.

These different proposals are part of the general movement to strengthen the process of European integration and to bolster the single market, a project that will be spearheaded by Michel Barnier of France.

Barnier himself wants to introduce increased cooperation in the financial services domain, check the correct application of community law and explore the question of the cross-border transfer of company headquarters. He has also announced new initiatives, notably in relation to mortgage lending.

Promoting good governance

There is one more policy target to which Switzerland will need to pay particular attention.

“The reinforcement of the battle against tax fraud and evasion on the EU and international levels will be at the heart of my policy,” writes Lithuanian Algirdas Šemeta, who will be in charge of this dossier.

He plans to adopt a two-pronged approach. “Firstly, I wish to promote good governance inside and outside the EU, particularly by closing up the gaps in the European savings taxation directive and by stepping up the EU’s action against third countries and tax havens.

“Secondly, I will insist that cooperation between the administrations of member states is considerably improved.” Semeta even goes so far as to envisage the creation of an “operational network Eurofisc”.

Tanguy Verhoosel in Brussels, swissinfo.ch (translated from the French by Clare O’Dea)

Fiscal differences

Privileges: The row between Bern and Brussels centres on the tax regimes of certain Swiss cantons, criticised by the EU for the privileges they offer.

Disloyalty: The EU judges it disloyal and contrary to the Free Exchange Accord of 1972 the treatment of foreign companies in, for example, Zug, Schwyz and Obwalden.

Swiss position: Bern maintains that the taxation procedures of administration companies, mixed companies and holdings are outside the remit of the 1972 accord, which covers the trade of certain goods.

OECD: For its part, the Organisation for Economic Co-operation and Development finds no fault in the tax regime of the Swiss cantons.