The European Union has lashed out at Swiss authorities for breaching bilateral agreements and offering illegal state aid to companies that relocate there for tax benefits, the FT reports.

The EU has upped the pressure on Switzerland to abolish the tax cuts it offers, as the Union's irritation intensifies that multinationals are locating their headquarters and distribution centres there.

Kraft Foods is one such company, having uprooted from Vienna and London in favour of Zurich.

Switzerland has described the Commission's agreement as 'unfounded', saying that there are no contractual agreements between the Swiss and the EU, making infringements impossible.

The EU is particularly upset over a law that allows Swiss cantons to exempt profits generated abroad from regional and local company taxes. The EU claims these tax breaks over a 'formidable incentive' for companies to relocate.

France presidential candidate Nicolas Sarkozy , meanwhile, has pressed for a European tax on 'speculative movements' by financial groups such as hedge funds.

In an interview with Les Echos , Sarkozy said he wanted to 'improve security in financial capitalism'.

'We did not create the euro to have capitalism without ethics or morals,' he said. 'I am extremely worried about speculative movements. Who can tolerate a hedge fund buying a company with debts, firing 25% of the staff and then reimbursing them by selling it in pieces? Not me.'

Further reading:

Corporate pressure forces foreign dividend tax rethink

French finance minister admits taxpayers will be hit

One rate fits all for EU tax