By Filipe Rufino - 15th February 2007
Luxemburg’s prime minister Jean-Claude Juncker has offered to mediate between Brussels and Switzerland over an escalating row on corporate tax breaks.
The European commission on Tuesday accused Bern of breaching its free-trade agreement with the EU by allowing several of its cantons to offer tax advantages to companies based in Switzerland but doing business in the EU.
Brussels is also concerned that more and more multinationals, such as General Motors, Kraft Foods and Procter & Gamble are shifting their EU headquarters to Switzerland in search of lower taxes on foreign revenues.
Earlier this week, EU external relations chief, Benita Ferrero-Waldner, said the Swiss “enjoy the benefits of access to the internal market and must accept the responsibilities that go with it.”
But Juncker, whose country also grants special tax privileges to companies and banks, called on the commission not to "treat Switzerland like the Iraq of the Alps".
Bern has accepted Juncker’s offer, but warned it will not budge on the issue.
"There is no contract between Switzerland and the EU on the harmonisation of company taxation", said Swiss president Micheline Calmy-Rey.
However, Former German minister for finance, Socialist Hans Eichel said the EU should not accept the “unfair” tax incentives practiced in some of the Swiss cantons.
And in a possible swipe at Luxembourg’s own tax regime Eichel said that other countries also needed to get their houses in order.
“That is not Switzerland’s fault alone, but also that of a number of other states,” Eichel said in a statement.
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