COMPANY TAXATION : EU WANTS CODE OF CONDUCT DIALOGUE WITH SWITZERLAND.
The 27 finance ministers will approve a report and conclusions on the activities of the Code of Conduct Group that the EU had created, in 1997, with a view to combating harmful tax competition. The group is made up of the personal representatives of finance ministers. Since then, EU member states have had to dismantle more than 100 regimes - holdings 1929 in Luxembourg, coordination centres in Belgium, etc - anticipating such a weak level of taxation that they represented an incentive for company relocations, thus distorting competition.
Finance ministers will give the green light to the "geographical extension" of the application of the code, already anticipated in 1997, but never applied. "It is indicated that the principles aimed at eliminating harmful tax measures must be adopted in a geographical context, which is as broad as possible. To this end, member states are committed to promoting their adoption in third countries," they had stressed at the time.
In its report, the group "recommends that the Commission must be invited by the Council to initiate dialogue" with non-EU countries "with a view to establishing to what extent they would be prepared to subscribe to the principles and criteria of the code".Which ones? "The greatest priority must be granted to neighbouring third countries, which have potentially harmful tax regimes, in particular Liechtenstein and Switzerland," adds the report.
In this context, the draft conclusions of the finance ministers, which will in all likelihood be adopted as such, invite the Commission to initiate "dialogue" with the two countries. According to the group, on this occasion it will be a question of "establishing up to what point they could subscribe to the principles and criteria of the code".
"Combating unfair competition does not stop at the EU's borders. It is not only in terms of savings taxation that these countries must make an effort," commented a diplomat.
This is not a matter that will be dealt with immediately.
The Commission will be invited by member states to draw up a report on the steps to be taken "by the end of the Belgian Presidency" of the EU, in December.
First and foremost, Italy and Denmark demand that, "in view of maintaining the credibility of the exercise," the 27 ministers must carry out a precise evaluation of the Swiss regimes, "which are known for being fiscally attractive" and could fall within the field of application of the EU code.
Besides the cantonal measures in favour of holdings, domiciliation companies and mixed companies - that Berne has already committed to amending, provided the EU agrees to sign a ceasefire agreement on this front (which Italy is refusing to do) - it is the new Swiss regional policy as a whole that aims to favour the economic development of the least developed regions, which could be tackled.
For the past two years, the European Commission has been criticising relocations from the EU territory to certain Swiss border areas, where companies may sometimes obtain tax exemptions for ten years or longer if they undertake investments.
"An agreement between the Swiss cantons would exclude the possibility of granting such state aid for the relocation of economic activities from one canton to another. But this restriction does not apply to companies established in the Union," underlines a Commission report dated November 2009.
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|Date:||Jun 2, 2010|
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