Talks between Switzerland and the European Union on corporate tax rates are progressing, officials said today.
“It was attested that big progress has been made,” Swiss Finance Minister Eveline Widmer-Schlumpf said in Bern today after a meeting with EU Tax Commissioner Algirdas Semeta, who called Switzerland a “close friend of the EU.”
Switzerland has been at odds with the 27-nation bloc over the preferential tax treatment given to multinationals, and had until the end of June to offer a solution or face reprisals. The Swiss government said last month that it would stop differentiating between foreign and domestic income. Instead, in a bid to remain attractive to corporations such as Procter & Gamble Co. and Trafigura Beheer BV, it will introduce new tax exemptions and cantonal governments may cut tax rates on profits.
To make up the tax shortfall, estimated at between 1 billion francs and 3 billion francs ($1.1 billion to $3.3 billion) annually, the Swiss government will offer alternative incentives, which could include lower taxes on intangible assets like license fees for patents.
More details will be announced before the end of the year, Widmer-Schlumpf said today.
The EU is the top destination for Swiss exports. The two are at odds over a number of matters, including immigration and banking secrecy that some citizens of EU countries used to evade taxes.
Widmer-Schlumpf said last week Switzerland would join the international push against tax dodgers and allow banks to share clients’ information, provided the practice became a global standard.
“It is very important that automatic exchange of information is clearly on the table,” Semeta said. Other options also were discussed today, according to Widmer-Schlumpf.
Meanwhile, the European Commission last week announced a plan that would rewrite bank secrecy laws across the 27-nation bloc by making dividends, capital gains and other forms of financial income to automatic exchange of information among tax authorities beginning in 2015. The step still must be approved by member states.
The auxiliary regime is not used by all of Switzerland’s 26 cantons. Zug, home to commodities trader Glencore Xstrata Plc, grants all companies a low rate, with the effective average corporate tax rate amounting to 13 percent in 2011.