Swiss-Italian tax battle hurting border-region businesses

Despite its healthy share of sunshine, a dark cloud hangs over the canton of Ticino. A tax battle with neighboring Italy is aggravating cross-border relations — and it shows no sign of ending. Negotiations on a new double-taxation agreement between Switzerland and Italy have bogged down, with banking secrecy a key stumbling block. Fed up with waiting, the Ticino authorities last month took matters into their own hands, by blocking 30 million francs in taxes bound for Italy. Some Italian politicians took notice, calling for tax talks to start immediately, but progress is still slow-going. WRS’s Tony Ganzer reports:

The canton of Ticino is kind stuck between a rock and international border. On one side stands a mountain range, separating the canton from the rest of Switzerland. On the other side is a vital trading partner–Italy. And caught in the middle are some businesses who say this tax fight is strangling the canton’s life blood—cash.

Take the Gruppo Siccurezza for example. The Lugano company with about 40 employees installs high tech security equipment, like CCTV cameras, or alarms, and it operates a 24-7 monitoring center for customers.

“Last year my company has suffered twice: the loss of clients, and twice because of the strength of the Swiss francs. We did lost about 25% of income,” says Company Chief Financial Officer Lorenza Bernasconi.

A sign on the way to Gruppo Sicurezza’s offices. (Photo: Tony Ganzer)

She says she’s lost about 20 clients, and has had to fire one employee since Italy added Switzerland to a black list of tax havens requiring more paperwork and fees to do business over the border.

Bernasconi says there is no doubt why customers left.

“Everyone told us because of these taxes, because of the black list. They are clients since 10 years, 8 years. It’s a pity,” she says.

In real terms, Bernasconi says the extra work could cost 3 or 400 euros every few months. For a security package costing 500 euros a year, those fees take away her business’s advantages.

Simona Morosini Marconi is vice director of Ticino’s chamber of commerce. She says the tax battle with Italy has gotten worse, and new requirements have burdened Ticino companies, especially those with Italian clients. She says the strong Swiss franc has hurt as well, though she admits the problem isn’t yet tragic—businesses are hanging on.

But any problem hurts, because, she says, the region lives from its connection to Italy.

“The peculiar situation that you can see here in Ticino concerning the people who work in Switzerland and in the evening go back home, is definitely due to the very nature of the Italian state and Italian economy,” says Nanad Stojanovic, who teaches political science at the Universities of Lausanne and Zurich. He is also a cantonal politician in Ticino representing Social Democrats.

“The Italian government itself is in a very difficult position, or let’s say even in a mess, because the coalition of Berlusconi is a rather weak one,” he says.

Italian Prime Minister Silvio Berlusconi has had to rely more on the populist Lega Nord party, Stojanovic says, which takes a more hard-line to taxes and Switzerland.

Meanwhile the populist Lega dei Ticinesi has connections with Lega Nord, but itself takes a hard-line on Italian workers crossing into Switzerland.

“This is a weird part of the story,” Stojanovic says, “because the economy of the canton of Ticino is clearly dependent on these workers coming every day from Italy to work in Ticino, and going back in the evenings.”

Stojanovic says this complicated political reality has made tax negotiations between Italy and Switzerland difficult, compounded by the Italian debt crisis, and long-standing dispute over Italian money hidden in Swiss banks.

For Lorenza Bernasconi with Gruppo Siccurezza, she can only hope for an agreement.

“The problem is that the Confederation doesn’t consider this problem like a [priority], but for the Italian part of Switzerland it is a big issue,” she says.

Both Italian and Swiss officials have said they are open to negotiations, but a concrete deal to end the tax fight is still out of sight.

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