No tax guarantee from commodity trading hub Geneva

Geneva proposed to set tax rate of 13 percent

* Some commodity traders concerned about reform

* A third of global oil traded in Geneva

By Emma Farge

GENEVA, July 9 (Reuters) - The Swiss canton of Geneva, pressured by EU demands to end tax breaks, cannot guarantee its proposal for a tax compromise will get through, its finance minister said, even though trading houses said less attractive conditions could drive them away.

In April the co-owner of Gunvor, Gennady Timchenko, said it could move to Singapore, a rival commodity trading hub, if Switzerland became less attractive.

Geneva is the hub for a third of the world's physical oil traded volumes, according to the Geneva Trading and Shipping Association. For Switzerland as a whole, the commodity sector accounts for around 3.5 percent of gross domestic product and employs around 10,000 people.

The canton said last October it would scrap its system of tax privileges and introduce a flat 13 percent rate after Brussels put pressure on Switzerland to reform a tax regime it said amounted to unauthorised state aid.

"We can't guarantee anything ... We are in a direct democracy and there could be votes on a federal and a cantonal level," Geneva's finance minister, David Hiler, said in an interview.

The proposal would mean a lower tax rate for some firms but a likely jump of around 2 to 4 percent in taxes for large commodity traders such as Vitol and Gunvor.

Even so, Geneva's overall tax income would fall, because some Geneva-based companies do not qualify for special tax breaks and currently pay a tax rate of 24.2 percent. The canton is currently seeking federal support to help fill a 460 million franc ($518.5 million) gap that would result from the reform.

Hiler, a member of the Green Party, also said that Switzerland was unlikely to grow further as a trading hub, dashing hopes the sector could replace lost revenues from banking, where the tradition of bank secrecy is under attack.

"It seems that the sector is reaching maturity. I think it's natural that their future activities develop in Asia," he said, referring to higher growth rates in demand for commodities in Asia than in Europe.

"It is a period of consolidation, and we can't expect several more giants to come here that aren't already. It won't happen like that," he said.

Most global commodity firms already have branches in Singapore, which can offer tax rates as low as 5 to 10 percent through its Global Trader Programme.

Switzerland has attracted companies for other reasons than just low taxes, including security and ready access to trade finance, Hiler said.

Other sectors have the potential to grow in Geneva such as research and development, he said.

The changes to cantonal taxes are expected to come into effect by 2019. ($1 = 0.9644 Swiss francs) (editing by Jane Baird)