Monday, November 28, 2011

Swiss blow a one note alpine horn on sovereignty

We've been blogging on corporate tax abuse through Switzerland, such as that perpetrated by the Canton of Zug (see here, here and here for example.) Now, as reported in Swissinfo on Nov 26:
The European Union may consider taking measures if no progress is made in talks over the varying Swiss corporate taxation rates in its 26 cantons. Switzerland has been holding exploratory talks with the EU for the past year following a request for it to fall in line with the principles of the EU Code of Conduct for Business Taxation.
The article explains:
So far, only the “parameters and criteria” for dialogue have been discussed.
Slow progress, then. But now it seems the EU may be taking a harder line:
A group responsible for the Code of Conduct will look at alternative measures “if no satisfactory progress is made in this dialogue” within the next six months, according to a report presented by a group of experts to EU finance ministers ahead of their meeting on Wednesday ... diplomats of EU member states hinted that retaliation measures were possible if Switzerland did not step up the process.
On the EU Code of Conduct on Business Taxation, Richard Murphy has commented:
"The EU haw an impressive record in tackling tax haven abuse: in my opinion it has been the most effective agency in the world in doing so ... its EU Code of Conduct on Business Taxation has been enormously helpful in tackling tax abuse both on and offshore".
For some useful backgound, see Tax Justice Focus: Switzerland, October 2010 - "The Swiss-EU Tax Dispute: Origins and Prospects", by Thomas Cottier, Professor of European and International Economic Law and Managing Director of the World Trade Institute, University of Bern, Switzerland. The article points out:
The dispute is a fundamental one. Tax, the Swiss government argues, is not subject to existing treaty relations and negotiations, and the EU has no say in matters exclusively pertaining to Swiss sovereignty and autonomy of the Cantons. The EU Commission, however, argues that exempting from tax the profits generated abroad by holding companies and related forms (such as letter box companies) resident in Switzerland amounts to distorting subsidies, contrary to Swiss obligations under the 1972 Free Trade Agreement (FTA).
It is interesting to note that the Swiss government has some trouble in its own back yard. Cottier points out that "the Swiss public at large generally dislike tax privileges for the rich and wealthy." As Swissinfo reported last June in Trouble in tax paradise: "In recent decades Zug has managed to attract numerous multinational companies thanks to its low tax policy. The downside of the economic growth is rapidly increasing rents, which make it hard for middle class families to find affordable homes."

So it is really the same old story, not sovereignty, but a strategy that enriches elites while impoverishing locals.

The Nov 26 Swissinfo piece observes in its closing statement:
Switzerland maintains that it is not bound by the Code of Conduct rules as it is not a member of the EU.
So that's all right then? The Swiss government continues to play the same old self-interested sovereignty tune, whilst blatantly siphoning off revenue from EU and other sovereign nations.

As Cottier pointed out:
Swiss Tax Policies need to move towards a concept of cooperative sovereignty, taking into account the needs of all partners.

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