Switzerland could face political pressure from the United States and European Union if foreign companies continue taking advantage of the country's low tax rates by moving their corporate headquarters here, a Swiss official said Monday.
Large global companies that relocate just a handful of staff to Switzerland and then benefit from lower taxes on their international earnings could prompt the ire of Washington and Brussels, said a spokesman for the Swiss federal office for international financial matters.
"On the one hand we think it's a good thing when foreign companies come to Switzerland," Mario Tuor told The Associated Press. But he added that "if a lot of companies move to Switzerland solely for tax reasons, then of course we become a bigger target."
His comments, first made to Swiss weekly NZZ am Sonntag in an article published Sunday, come days after U.S. oil field services company Weatherford International Inc. listed on the Zurich stock exchange. Other companies that have set up international headquarters in Switzerland in recent years include engineering contractor Foster Wheeler, manufacturer Tyco International, and oil field services firms Nobel Corp. and Transocean Ltd.
Transocean, which owned the Deepwater Horizon rig that exploded in the Gulf of Mexico, was recently included in the SMI index of Switzerland's 20 biggest publicly listed companies. Weatherford could join that elite group in February, giving landlocked Switzerland's main stock market a heavy stake in the offshore drilling industry.
NZZ am Sonntag reported that Weatherford currently has only four of its 53,000 employees in Switzerland. The company didn't immediately respond to requests for comment Monday.
Tuor said the EU was already heavily critical of the fact that foreign holding companies enjoy lower tax rates in some Swiss cantons (states) than local firms. Brussels accuses Switzerland of indirectly subsidizing foreign companies and has demanded to hold talks with Bern on the issue.
"We are coming under pressure," said Tuor. "Not just from the EU, but mainly from the EU."
As far as the U.S. was concerned, "we have got some evidence that it's frowned upon," he said.
The chairman of the U.S. Senate's Finance Committee, Max Baucus, said earlier this year he would investigate whether Transocean — which was once based in Delaware — was exploiting loopholes in U.S. tax law by moving its headquarters overseas.
Switzerland last year caved in to international pressure to grant foreign tax authorities greater access to information on individuals suspected of hiding money in Swiss bank accounts.