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Thursday, 26 April 2007 - Strasbourg OJ edition

4. Relations between EU and Switzerland (debate)

  President. The next item is the Commission statement on relations between the European Union and Switzerland.


  Joaquín Almunia, Member of the Commission. (ES) Mr President, I am going to read the Commission statement on relations between the European Union and Switzerland, and although you and I speak the same language, I shall do so in English.

Mr President, the Commission is pleased that this item has been put on the agenda because it is now more than two years since we last discussed Switzerland. It was in 2004, on the occasion of the conclusion of the 10 new bilateral agreements. Let me start, therefore, with a general remark.

The bilateral and multilateral relations that link the EU and Switzerland are very good. Switzerland is a highly valued partner for the EU in many areas. Our bilateral relations are based on a solid foundation of around 20 important and over 100 smaller sector-specific agreements. These agreements range from free trade in goods and the free movement of persons to Swiss participation in our research and Schengen cooperation. Any existing differences should not have an inordinate impact on our relations.

In February, the Commission adopted a state aid decision on Swiss cantonal tax favours for certain types of companies, in particular holding companies. This decision has received much media attention in Switzerland and has been dramatised, by some, into a major conflict.

Legally, the Commission has no doubts that the cantonal tax schemes qualify as subsidies, because these tax regimes offer unfair tax advantages to companies established in Switzerland for profits generated in the European Union. Income generated in Switzerland is taxed higher than profits made in the EU. This unequal treatment is at the heart of the state aid problem. The rules in question are liable to distort competition and may affect trade between Switzerland and the EU. All criteria of Article 23 of the agreement of 1972, the provision which declares such state aid incompatible with the proper functioning of the agreement, are therefore fulfilled.

Politically, too, it seems hard to accept that a neighbouring country that enjoys privileged access to our internal market and takes part in a large number of our programmes and other activities should grant such tax favours. The benefiting companies are often set up with the sole aim of avoiding the taxation of profits in our Member States. I would like to point out that tax schemes of this kind or similar are not allowed inside the EU, pursuant to the state aid rules set out in the EC Treaty. In the past, the Commission has adopted decisions against them. We are not against tax competition, which also takes place among the Member States, but it must be fair.

The Commission wants to find a mutually acceptable solution. Therefore, we also asked the Council in February for a mandate to start negotiations with Switzerland on this topic. Member States support the Commission in this respect, and such a mandate is currently being prepared in the Council. I am also counting very much on Parliament’s support in this matter. We proceed from the belief that we will find a solution for this problem, just as we have always found solutions for problems in our relations with Switzerland in the past.

On a different matter of importance, I would like to express the Commission’s expectation that Switzerland will, hopefully, soon be ready to negotiate the inclusion of Bulgaria and Romania in the Agreement on the Free Movement of Persons. If Switzerland were to exclude the citizens of two Member States from this very important agreement, it would be unacceptable for legal, institutional and political reasons.

Bulgaria and Romania should also receive a financial contribution from Switzerland for the reduction of economic and social disparities, on the same terms as the other 10 new Member States.

In view of the Swiss position on EU accession and the European Economic Area, there is currently no alternative to further strengthening of bilateral relations. With that in mind, the Commission is prepared to look into the Swiss proposal for the negotiation of a general framework agreement, provided that it brings an added value to our relations, for instance with regard to the updating of existing agreements in line with the evolving Community acquis.


  Andreas Schwab, on behalf of the PPE-DE Group. – (DE) Mr President, Commissioner, ladies and gentlemen, I welcome the statements made today by Commissioner Almunia. I believe that these statements also largely meet with the consent of my group. The relationship between the European Union and Switzerland has been a special one since time immemorial. Commissioner Almunia touched on the various agreements.

In this respect, our partnership with Switzerland is characterised by particularly close cooperation but which has not, as yet, ended up with Switzerland becoming a member of the European Union. Nevertheless, Switzerland is an extremely important trading partner as well as being a friend and neighbour. I find this particularly congenial since my electoral district directly borders Switzerland. I would therefore like to appeal to all sides not to jeopardise these good neighbourly relations by means of stubbornness or excessive demands placed on one side or the other.

The tax dispute has already been touched on. The topic of Switzerland would certainly also be cause for a comprehensive discussion here in Parliament. Today, however, as has been described by Commissioner Almunia, we are obviously concerned with the subject of fiscal practices. On this theme, I would like to say that, unlike our colleagues from Great Britain, for instance, and representations to the contrary coming out of Switzerland, we are of the opinion that this issue does not involve intervention in a country’s right to levy taxes, but is more an issue of whether enterprises which belong to the European single market, and which may enjoy the advantages afforded by this single market, are receiving unjustified subsidies. We are talking about the principle of equal treatment and the abolition of hidden subsidies. In this respect, the approach adopted by the Commission, that the Swiss have to apply some finishing touches here, is the correct one, even if it may have been more prudent to begin with negotiations instead of a procedure. The statement that it is a matter for the canton is neither applicable nor effective in my opinion because what we are talking about are hidden subsidies which must be abolished.

For its part, the EU must clarify the fact that while it naturally respects Switzerland’s sovereignty on tax matters, the EU’s basic principles, which Swiss enterprises also benefit from, must apply to all enterprises within the internal market.

Finally, I would like to point out that we must find a solution to this problem in the interests of European enterprises, as well as its citizens, to which both parties have contributed. That is why I am calling on both the Commission and our Swiss neighbours.


  Pervenche Berès, on behalf of the PSE Group.(FR) Mr President, Commissioner, I welcome your statement, because you have taken note of what we have been saying for some time now, namely that the practice that is being developed in certain Swiss cantons – without mentioning the main ones of Zug, Vaud and Schwyz – constitutes a violation of the 1972 agreement on forms of State aid that contradict the rules of fair competition and that affect the nature of trade between the European Union and Switzerland. The fact is that Switzerland, as a friend of the European Union, benefits from the same conditions of access to the EU internal market as any Member State. You cannot have your cake and eat it, meaning, in this case, that you cannot have both the internal market and exceptions for certain Swiss cantons.

It is not a question here of referring to this or that media figure among natural persons, but indeed of referring to substantial sums that are at stake due to the practices being developed by certain legal persons. Therefore, once a problem has been identified between friends, it should be dealt with. This is what you are proposing to do. You will have my group’s full support in this matter, and I am delighted that other groups in this House share this approach.

As far as Switzerland is concerned, we are told that Swiss internal affairs are being interfered with. However, in an international trade environment, freedom is not unilateral. Account must be taken of others’ circumstances, and the freedom of one party stops where that of the other begins. I believe that, when it comes to our excellent relations with Switzerland – and President Barroso reiterated this when he was in Bern the other day – this is how we must act.

At times, Switzerland has been able to divide and rule among Europeans, and everyone will recall the circumstances in which, after the Feira conclusions had come out and we wanted to adopt the Directive on the taxation of savings within the Union, some people used Switzerland to divide us. I am delighted that the conditions for negotiating the mandate granted to the Commission will clearly enable the Member States to speak with one voice, while showing respect for Swiss sovereignty. That is a very good sign, in my view.

To conclude, I should like simply to make an obvious point: when one considers the logic of the Swiss taxation system, the idea that a taxation system should take account of external costs is absolutely integral to the Swiss thinking on taxation. To put it plainly, certain Swiss practices confirm the fact that, from the moment that production does not take place on Swiss soil, the cost of infrastructure or of employing qualified workers does not have to be incorporated in the taxation system. We must – at the very least in terms of trade with the European Union – highlight the following situation: as the taxation system developed in certain Swiss cantons currently stands in relation to that of the EU Member States, we are losing revenue, since these production activities are being developed on our territory and the tax on the capital gains generated in this way is being channelled into Switzerland to avoid the need to provide any funding for these external costs. I wish you luck in the negotiations.


  Diana Wallis, on behalf of the ALDE Group. Mr President, I wish to thank the Commissioner for his statement.

Here in Parliament we have long wanted to discuss the whole of our relationship with Switzerland and to celebrate Swiss success in three successive referendums on EU issues – referendums that would scarcely have passed in many of our Member States. Although Switzerland is not a Member State, Swiss people are informed Europeans.

We wanted to discuss the interesting government report on European policy last autumn to recognise that, yes, the Swiss wish at present to pursue their own national interests outside membership, but also perhaps to counter some misconceptions about what might be on offer here. In my view it amounts, as the Commissioner has said, to building on the bilaterals and perhaps a framework agreement that simplifies the administrative load on both sides. However, what some of us would call ‘membership-light’ is not on offer, and that is where the current difficulties over cantonal tax might stem from.

Either you are a member of the European Union or you are not. Switzerland is not, and both sides do well to recall that. Switzerland does not enjoy the benefits of membership, nor is that country subject to all of the obligations. That is the difficulty of such an atypical, variable geometry: it will forever throw up problems and sources of irritation. However, those problems should be solved with goodwill.

Let us take the tax issue head on. If what the Commission really wants from Switzerland – which I suspect to be the case – is to extend the Code of Conduct for Business Taxation, then let us talk about that. Even between Member States it is a voluntary code. I have no doubt that there are offshore taxation arrangements in a Member State I know only too well that would not bear close scrutiny, yet I do not see such activity from the Commission in that direction.

We need a discussion as benefits the relationship between the EU and our nearest geographic neighbour in the heart of Europe, a country providing our second largest export market and an inspiration to us and many in terms of its democratic structures and internationalism. Instead, we tell the Swiss that their cantonal tax systems are ‘predatory’. That is a strong and unpleasant word. If they are indeed predatory, I would expect to see a line of obvious cases of actual harm to Community trade: practical examples that could be cited and demonstrated as having this predatory effect. I have seen none mentioned. Indeed, the Commission relies instead on an argument that it does not have to demonstrate but merely show that the structures could have this effect. However, there are no actual examples and I wonder whether that is because, under examination, they would not stand up against the strained argument that is put forward – an argument against a non-member state, based on an old free trade agreement, designed primarily to deal with the trade in goods.

Let us look at it in another way. Perhaps my voters in Yorkshire might wonder why I spend so much time on Switzerland. However, if my northerly region of England had enjoyed over the years the level of fiscal autonomy vis-à-vis London that Swiss cantons have in their country, maybe we would not have been such a drain on EU Structural Funds.

Switzerland contributes financially to our enlargement process with popular consent. This is a deep and complicated relationship, one that over the years I have found exasperating and frustrating, but never, ever dull! We are often told to be nice to the Swiss before a referendum. We are asked continuously what we will do if they vote ‘no’. The answer is that the choice is always that of the Swiss people, but if they wish to work with us, we have to work with them in a respectful and proper way. The best I would like to see is that one day there are Swiss ministers in the Council, a Swiss Commissioner and Swiss colleagues here with us to debate these issues, not us doing so at second remove.


  Mario Borghezio, on behalf of the UEN Group. – (IT) Mr President, ladies and gentlemen, this debate on relations between the European Union and the Swiss Confederation provides us with an interesting and timely opportunity to reflect briefly on what we can learn from the ancient democracy of the small, yet historically important federal republic of Switzerland.

If the Swiss federal tax system were well known to the taxpayers of the EU Member States, it would be a model to be imitated – as indeed it is – especially with a view to protecting economic freedom.

I would remind the Member States’ taxpayers that Swiss legislation is based on important principles, such as the principle of legal equality, the principle of economic freedom and, above all, the principle of the guarantee to property.

The principle of legal equality imposes the duty to tax according to economic capacity. Thanks to constitutional provisions, the principle of economic freedom forbids the collection of certain taxes on trade that would be prohibitive in the context of trade policy. Lastly, the important principle of the guarantee to property, enshrined in Article 26 of the Federal Constitution, forbids the imposition of tax when it takes the form of expropriation; thus the guarantee to property constitutes a limit to taxation.

That is what needs to be learnt by those Member States which, like Italy, still oppress taxpayers with their tax legislation and tax burden, which in Italy exceeds 40%. From this great historical experience, we need to learn the principles of economic freedom contained in the Swiss Constitution. Those of us from Padania have the good fortune to be the next-door neighbours of those free people of Switzerland.

Lastly, let us also think about the principle of freedom of belief, on the basis of which people are not obliged to contribute taxes to pay for the costs of religion if they do not belong to that religion, and also the fundamental right to express one’s wishes directly through the referendum on taxes. It is time to do away with the Member States’ fiscal dictatorship over taxpayers! Let the people have their say on taxes!


  Andreas Mölzer, on behalf of the ITS Group. – (DE) Mr President, ladies and gentlemen, when Swiss citizens rejected entry to the European Economic Area back in 1992, no one would have been able to imagine today’s emerging developments. On the one hand, both the EU and Switzerland are benefiting from cooperation and bilateral agreements, for instance, in connection with security and asylum. On the other, we have relentless negotiations, demands and even blackmailing, for example, in connection with the extended freedom of movement of persons and the taxation of savings income, or currently in connection with company taxation as regards which, it is the intention to use derogations relating to rail transit, which are so important as far as Switzerland is concerned, as a means of exerting pressure.

When Switzerland tightened its Asylum Act many years ago, the European Union did not hold back with its criticism. This was designed to clamp down on the 75% of applications for asylum which were incorrectly submitted every year, which is actually what happened. This about-turn by Switzerland, which has traditionally been so welcoming to visitors, forced those persons within our Union who dream of multiculturalism to reconsider, and the Union actually had to make an example of this Swiss Asylum Act.

Now is the time for us to seek solutions together to common problems which we face in the tax sector, as well as with regard to migration and integration. Above all, we should use Switzerland as an example in terms of direct democracy, for only if EU citizens are once again under the impression that their intentions are being taken seriously, that they can have their say in matters, might we then be able to extricate ourselves from the crisis currently facing the EU.

The disputes surrounding the EU Constitution and additional EU enlargement offer adequate opportunity to use Switzerland as an example.


  James Nicholson (PPE-DE). – Mr President, the European Union has many bilateral agreements with Switzerland. These have seen the prospering of both the Swiss and Member States of the European Union. The bilateral agreements should be recognised by all representatives of a joint and shared desire for prosperity. There are further indicators that show the things we share and the direction we are heading: amongst other things, Switzerland is the second-largest trading partner of the European Union after the United States. 900 000 EU citizens live and work in Switzerland, while many more travel between these borders on a regular basis. However, the present disagreement between the Commission and the Swiss Government is disconcerting and should be addressed swiftly.

I realise that the issue of double taxation which the EU and Switzerland are facing is no small one, but I would not like to see threats made in the preliminary rounds of negotiations, or in later rounds for that matter. The issue of double taxation does not offer an easy way to investment, jobs and revenue for the Swiss cantons that allow the double standards. The Council and Commission and Parliament should do its utmost to protect the interests of the Member States.

I wish you well in your negotiations and look forward to a positive outcome.


  Aloyzas Sakalas (PSE). (LT) First of all, I would like to thank Commissioner Almunia for the information he has presented about relations between the European Union and Switzerland.

However, I would like to hear what Mr Almunia has to say about the ultimate political goal of these relations. In other words, is the development of closer relations between the European Union and Switzerland undertaken with an eye to membership of Switzerland in the European Union at a future date; if so, when can we expect this, and what must Switzerland and the European Union do before then? If the development of closer relations is not aimed at Switzerland's membership, but is aimed instead at a privileged partnership for Switzerland with the European Union, then what should be the principles of such a partnership?

I do not think that bilateral agreements definitively solve the problem of Switzerland's political future; therefore, I would like to hear from Mr Almunia something similar to a road map, from which one would be able to see the direction of the Commission's work in developing the European Union's relations with Switzerland. From the material presented it is hard for me to say whether the Commission has such a road map, or whether temporary agreements are a substitute for it.

My proposal would be as follows: it is necessary to produce a road map of the development of relations between the European Union and Switzerland, the ultimate goal of which would be either Switzerland's membership in the EU, or its privileged partnership in terms of the yet-to-be approved Constitutional agreement. In order to choose either solution, it is essential to know the Swiss people's own opinion about the prospects for their country.

Until we solve this political problem, we will continue to make various agreements, and both parties to the negotiations will try to demand more favourable conditions for themselves at the expense of the other party.

As I study the existing and planned agreements, I have serious doubts as to whether we might just be making greater demands on Switzerland, which is still not a member of the European Union, than on the European Union Member States themselves. In my opinion, the opposite should be the case.

I hope that Commissioner Almunia might disperse my stated doubts by responding to the issues I have raised.


  Mieczysław Edmund Janowski (UEN). – (PL) Mr President, Switzerland is viewed as a historic example of European integration by many people. We need only to think of Jean Jacques Rousseau or Johannes von Müller. However, it seems to remain an island, a Sonderfall, beyond the united Europe which surrounds it on all sides.

Let us remember that, in a referendum held in 1992, 50.3% of Swiss citizens themselves voted against their country joining the European Economic Area. I do not wish to interfere in the internal affairs of the Confederation in any way. In highlighting the good cooperation between Switzerland and the European Union in almost all areas, I hope that the right solution can also quickly be found in terms of taxation. This is extremely important in order to achieve transparency in terms of our cooperation.

On behalf of the new Member States, including my own country, I would specifically like to welcome the outcome of the referendum held on 26 November 2006, which accepted the establishment of a Swiss Financial Instrument to the tune of one billion francs. For their part, these countries have flung open their doors to Swiss capital investments. In Poland, for example, imports from Switzerland rose by 20% during this period, while exports increased by only 5% less. I am sure that Swiss funds will be used sensibly for innovative purposes, including scientific research, providing support for small and medium-sized companies, as well as protecting the environment and fostering regional development.

Finally, I would like to add that Switzerland has a particularly positive image in the European Union. According to my data, around 72% of Europeans would be happy to welcome the Swiss Confederation into our common European home. Perhaps it would be wise to make the most of this positive attitude.


  Daniel Hannan (PPE-DE). – Mr President, why are the Swiss doing so much better than us? Why is the Helvetic Confederation richer, more content, more orderly and better administered than the European Union? Allow me to suggest a reason. Switzerland is founded on what one might call the ‘Jeffersonian principle’: the notion that decisions should be taken as closely as possible to the people they affect. The European Union, by contrast, is founded on the converse principle. The very first line of the very first article of the Treaty of Rome commits us to an ever-closer union. Whereas power in Switzerland is dispersed, power in the EU is concentrated, and from that one structural flaw come most of our present discontents: the unintended consequences of our directives and regulations, the inflexibility of our policies, the sense that the government has become remote from the governed, the determination of our national electorates to vote ‘no’ to Brussels at every opportunity.

Why then do we keep bullying and hectoring the Swiss over their refusal to join us? Why do we attack their success in keeping their cantonal taxes down? Why do we encourage that minority of Swiss legislators who see EU membership precisely as a way of sidestepping their voters and escaping their system of direct democracy? Is it that we envy our neighbours their success or is it that we fear that our own citizens will be encouraged by their example to demand independence for their own states?

Let me propose an alternative approach. Instead of seeking to drag Switzerland into our Union, why do our Member States not instead apply to become cantons of their confederation? They are, after all, getting something right, these Switzers!


  Ryszard Czarnecki (UEN). – (PL) Mr President, there are many referenda in Switzerland and this is one of the reasons why I would not want to be a canton in even such a pleasant country. Switzerland is a wealthy country, which does not have to be a member of the Union and, at the moment, does not wish to join the Union. At the same time, it is a good, strategic partner for the European Union. When one has such a partner, Commissioner, one negotiates and discusses, rather than initiating proceedings. I agree here with my colleague from the Group of the European People's Party (Christian Democrats) and European Democrats. As a Polish MEP, the case of Switzerland reminds me of the unfortunate and, until now, unsuccessful attempts of certain German and French politicians, such as Mr Nicolas Sarkozy, to unify taxation in the European Union, which would de facto lead to an increase in tax in my country. There will be no consent to this move. I am therefore not surprised that the Swiss now complain about Brussels interfering in the internal affairs of their country. This whole matter shows that the Union should take a look at itself. It should reform its own economy in such a way as to make it truly competitive, without resorting to proceedings, penalties and demands addressed to third countries or its own members.


  Joaquín Almunia, Member of the Commission. Mr President, allow me just a few words.

Firstly, I wish to insist that the Commission considers relations between the EU and Switzerland to be very good. Commissioner Ferrero-Waldner had the opportunity to meet the President of the Helvetic Confederation on 3 April. They discussed these very good relations, which do not exclude some legal problems, which can be likened to those which exist among the EU Member States.

Every time the Commission considers that the Treaties or Community legal provisions are not fully respected, as guardian of the Treaties, it is obliged to react. This has been the case with the issue under discussion: the tax decisions adopted in some cantons of the Helvetic Confederation. It is not about tax competition. It is about the enforcement of the rules that were adopted in our Agreement with Switzerland of 1972. It is not about tax competition but state aid. The Commission very often opens this kind of procedure on the grounds of failure to enforce state aid rules in the Member States, and it is a very important issue.

I do not know whether you are aware that over 20 000 letter-box companies have been established in Switzerland with the sole purpose of avoiding taxation in the European Union Member States. We have been discussing this issue with the Swiss authorities since 2005. We have not found a solution other than to open this procedure. We are asking the Council for a mandate to negotiate with the Swiss authorities to reach a solution to this conflict. I hope that, in the coming weeks, the Council will give us this mandate with the backing of a very large majority of the Member States. I hope that during the negotiations, these issues, which constitute sizeable problems for thousands of European companies, will be resolved.


  President. That concludes this item.

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