Interview with Algirdas Semeta, taxation commissioner
EU states “running out of patience” with Berne
By Tanguy Verhoosel | Thursday 19 April 2012
Taxation Commissioner Algirdas Semeta has agreed to answerEuropolitics
’ questions in writing.
What are the Commission’s priorities in the area of taxation as regards Switzerland?
There are two key areas on which we need to make progress quickly. They are the code of conduct on business taxation, and work in the area of savings taxation.
The EU has a long-established policy of fighting harmful tax competition, both in the EU and in relation to third countries. Our code of conduct for business taxation sets out the principles and criteria to ensure fair business taxation and remove harmful practices.
In June 2010, member states asked the Commission to start bilateral dialogues with third countries as part of the work to promote the principles of the code with third-country partners. Priority was given to Switzerland and Lichtenstein, taking into account their geographic location, integration in the internal market and concerns about their company tax regimes. Member states have said that they expect to see satisfactory progress in this dialogue before the end of June, so there is clearly some pressure to move these talks forward.
As regards the taxation of savings, the current economic crisis has thrown into the spotlight the need for stronger provisions to ensure that all member states can collect the taxes that they are legitimately due. To this end, the Commission has not only proposed reinforcing the EU’s own instruments (notably by revising the Savings Directive), but also to re-look at our arrangements with key neighbouring countries, not least Switzerland. We have asked Council for a mandate to negotiate a stronger EU-Swiss savings agreement. As soon as we get this mandate – which I am optimistic will be before the end of the Danish Presidency – we will rapidly startnegotiations.
Is Switzerland an easy partner for the EU in this sector?
Switzerland is an important partner, given the intensity of its economic relations with the EU. Obviously, in EU-Swiss discussions, both parties have their own particular interests in mind, and its no secret that our viewpoints on tax matters do diverge from time to time. But we try to ensure that discussions are frank, professional and constructive.
In this context, what assessment do you make of your meeting, on 20 March, with Swiss President Eveline Widmer-Schlumpf? Did you deliver any particular messages?
My meeting with President Widmer-Schlumpf was a welcome opportunity to exchange views on important tax matters in EU-Swiss relations. On my side, I took the opportunity to confirm with the president that Switzerland would be ready to engage as soon as the Commission is authorised to negotiate an improved and extended savings agreement.
I also explained to President Widmer-Schlumf that we cannot lose any more time on the code of conduct discussions. We urgently need to start the dialogue on company tax issues and we need to produce results. I believe that this message was well understood.
Switzerland will refuse to start discussing savings taxation and business taxation until it can obtain a guarantee that its Rubik agreements with the United Kingdom and Germany will be applied. Isn’t this blackmail?
President Widmer-Schlumpf has assured me that Switzerland is willing to discuss a new savings agreement when the EU is ready. As soon as the Commission gets the mandate, I am sure that our negotiations will get underway rapidly.
With regard to the code of conduct, even before these bilateral agreements you refer to existed, the dialogue with Switzerland was not easy. Despite what could be seen as exaggerated delay tactics on the part of the Swiss, member states have been very patient and even accepted Swiss requests concerning the scope of the dialogue. But I fear this patience is now running out. If Switzerland does not seriously engage in this dialogue and allow us to show real progress by the end of the Danish Presidency, member states are likely to resort to other methods of tackling what they perceive to be unfair company tax regimes in Switzerland.
What is the Commission’s position on these Rubik agreements?
The Commission’s position on the bilateral agreements that Germany and the UK signed with Switzerland has been extremely clear. The German and UK agreements, in their original form, gave rise to concern. As we explained to these member states, they breached the exclusive competence of the EU in the field of international savings tax and overlapped with areas that are already covered at EU level. I don’t question the competence of member states to enter into bilateral agreements with Switzerland. But these agreements must not include any aspects which impinge on areas of common EU action. This message was unequivocal in the letter I sent to the Danish Presidency and EU finance ministers, on 5 March.
Germany and the UK have reacted positively and worked to address our concerns by proposing amendments to their agreements. Indeed, the UK agreement has already been formally amended and Germany is working to revise its own. The Commission will look closely at the changes, as well as any future agreements that member states might sign with Switzerland to ensure compliance with EU law.
Switzerland proposes to conclude a framework agreement with the Union on Rubik. What are your views on that?
As I have already said, the Commission aims to negotiate a stronger and better EU-Swiss savings agreement as soon as it is given the green light by member states. I don’t want to speculate on what Switzerland might propose within these negotiations when that time comes. The objectives of the Commission are well known. We have identified the amendments that need to be made to the EU Savings Directive in order to strengthen it and close its loopholes, and we want to achieve equivalent amendments to the EU-Swiss savings agreement.
Once we can commence the negotiations, we will engage with ambition and openness. But we will also have our red lines. The EU is not prepared to back-track on good governance, nor will we accept bank secrecy that can support tax evasion. I remain convinced that automatic exchange of information is the best means of ensuring effective taxation of savings income, and we will push for at least equivalent measures from our international partners. Our negotiations with Switzerland will aim at securing the best deal possible, consistent with these principles.
Concerning business taxation, the Union has asked Switzerland to apply the “principles and criteria” of its code of conduct. Switzerland considers this too ambitious and wishes to examine case-by-case the issues raised by the Union, without making a commitment. Is that conceivable, in your opinion?
I have already referred to the flexibility that member states have shown with regard to the scope of the discussions with Switzerland on the code of conduct. But this has to be a two-way process. If Switzerland continues to drag its feet and refuse to engage seriously in the dialogue, member states are likely to lose patience and seek other ways of addressing the concerns they have with Swiss company tax laws. It is in Switzerland’s interest to work with the Commission and find a consensual approach in this area.
The Union has been demanding - for quite some time - the dismantling of certain canton-level tax schemes, among others, schemes applied to holding companies. Has there been any progress on this issue?
In 2007, the Commission adopted a decision declaring that certain cantonal tax regimes constitute state aid schemes incompatible with the EU-Swiss free trade agreement (1972). This decision remains in force. It is possible that we could look at these regimes in the EU-Swiss dialogue on company taxation.