EN Official Journal of the European Union CE 88/432

(2004/C 88 E/0437)

WRITTEN QUESTION E-2690/03

by Erik Meijer (GUE/NGL) to the Commission

(10 September 2003)

Subject: Freedom of cantons in Switzerland to turn themselves into a tax haven for international companies

1. Is the Commission aware that the taxation of companies registered in Switzerland is a matter for the individual cantons rather than for the ‘Confederatio Helvetia’ to which they belong, and that the level of company tax can therefore differ according to canton?

2. Is the Commission also aware that such tax competition between Swiss cantons has led to the canton of Schwyz becoming the statutory place of establishment of international companies or branches thereof which only have a small office and a P.O. box in the canton, and that in particular the northern part of this canton, which falls within the sphere of influence of the city of Zurich, especially the district of Höfe including the towns of Pfäffikon (SZ) on the Lake of Zurich, Schindellegi and Feusisberg, has become an attractive place of establishment?

3. Does the Commission know how many companies that do not conduct their business mainly in Switzerland but in the EU have moved the statutory seat of the company or branches thereof to the canton of Schwyz?

4. In the light of the wish to restrict tax competition not only within the EU but also in directly neighbouring countries, is the Commission engaged in direct consultations with the canton of Schwyz, rather than just with the ‘Confederatio Helvetia’?

5. If the answer to question 4 is affirmative, what has been the outcome of these consultations? If the answer is negative, when will consultations be opened?

6. Would it be possible, as a means of applying pressure, to impose sanctions if necessary against the government of the canton of Schwyz that would not affect Switzerland as a whole? Does the Commission intend to avail itself of this possibility if necessary?

Answer given by Mr Bolkestein on behalf of the Commission

(16 October 2003)

The Commission is aware of the fact that the federal system of Switzerland provides for corporate tax to be levied at federal, cantonal and municipal level and that the individual cantons apply different rates of corporate tax. The resulting difference in tax rates existing between different municipalities within Switzerland has, for many years, been subject of an internal political debate in Switzerland. The Commission does not have specific information on the effects of tax competition between cantons within Switzerland; nor does it have specific information on the number of companies conducting their business mainly in the Union but resident in the Swiss canton of Schwyz.

The questions from the Honourable Member appear to suggest that the canton of Schwyz attracts passive investment without any real economic activity taking place or without any real economic presence being transferred there. However, it should be noted that the tax legislation of Member States and their bilateral tax treaties with Switzerland contain specific rules limiting the possibilities of tax planning structures involving the use of so-called ‘mailbox’ companies. Most Member States also have specific anti-abuse measures in their domestic legislation designed to discourage aggressive tax planning structures that are based on artificial location of passive investment in low tax jurisdictions.

Regarding tax competition, the Commission is of the opinion that fair tax competition can have positive effects, such as reducing unnecessary tax burdens and increasing the competitiveness of the Union. However, unfair tax competition that affects, in a significant way, the location of business, without having an overall positive impact, is harmful. This is why the Commission is taking active part in the work against harmful tax competition in the enlarged Union, mainly through the Code of Conduct exercise. For the same reason the Commission is also actively engaged in the Organisation for Economic Cooperation and Development (OECD) work against harmful tax practices, which has a global approach and attempts to change the behaviour both of tax havens and of the OECD member countries (including Switzerland) to the extent that they participate in harmful tax competition.

So far the discussions, which have been taking place both at an Union level and elsewhere, including in the OECD, have been exclusively with Switzerland as it is the Confederation that is responsible for international relations. International law requires the Community to respect the constitutional division of powers in Switzerland and to conduct consultations with the Federal Government.

While not excluding a different approach in the future, the Commission is confident that, at present, the above approach provides the best means of ensuring fair tax competition, at a truly global level and would not, at this stage, wish to speculate on other measures.