Campione d'Italia, a tiny Italian enclave located in Switzerland was returned to Rome and the EU's customs union on January 1st, raising fears among residents accustomed to the enclave's special status.
Ownership of the enclave, located on the banks of Lake Lugano in the Swiss canton of Ticino around 20 kilometres from Italy, has ping-ponged between the two countries since at least the 7th century as the map of Europe took shape.
Following the unification of Italy in 1861, the two countries exchanged land and Campione as it was known then, acquired its unique status as an Italian territory in Switzerland's customs union.
That meant that although the roughly 2,000 residents paid their taxes in Italy, most of the public services were carried out by Swiss providers. Their rubbish was collected by a Swiss company, the telephone supplied by Swisscom, their cars had Swiss licence plates and shopping was mostly done in Swiss francs.
They were exempt from VAT and because the cost of living is higher in Switzerland, they also enjoyed tax breaks. Finally, they were one of only four Italian cities to be granted a casino licence.
But Rome demanded in 2016 that the enclave be brought into its customs territory and the EU acquiesced setting 2020 as the date of transference. Residents opposed the move, filing a petition with the EU in support of the enclave's "continued status as Swiss territory".
Since then, the casino, on which most of the local economy was based, went bankrupt and the two sides entered into negotiations. A deal was reached on December 20, 2019.
Under the terms of the deal residents now have to pay VAT, although it is aligned with the Swiss consumption tax of 7.7% — much lower than Italy's 22% rate — "thus avoiding potential distortions of competitions in the surrounding border region," the Swiss government explained in a statement.
Swiss private and public companies will continue to provide services to the enclave while Italy agreed to recognise and settle the enclave's debts owed to Swiss creditors estimated at 5 million Swiss francs (€4.6 million).
A border crossing is also to be established.