EU attacks ‘illegal’ Swiss tax rules
Swiss tax breaks that have enticed multinationals to move their headquarters out of neighbouring European Union countries are illegal state aid and must be scrapped, the European Commission said on Tuesday. The move is a reflection of the frustration felt in a number of European capitals about the growing number of companies that have shifted their headquarters or distribution centres to Switzerland.
Brussels believes the favourable tax rules that lure companies to Switzerland would be prohibited under EU law, especially a measure that allows Swiss cantons to exempt profits generated abroad from regional and local company taxes. Switzerland is not a member of the union, but it applies the bulk of EU internal market rules. In return, the EU gives Swiss companies privileged access to its vast market of 500m consumers.
Relations between the EU and Switzerland – arguably the union’s most conspicuous non-member – have warmed after Swiss referendums in 2005 and 2006 voted convincingly in favour of closer links. But the issue of inward investment – especially corporate relocations – has become extremely sensitive.
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