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Internet growth Google expands in Zurich but tax structure remains unclear

Google's new offices in the Sihlpost building in Zurich


Internet giant Google is extending its presence in Zurich. It has moved into new premises in the city centre and established an artificial intelligence research lab, its first outside the United States. However, its tax affairs remain opaque, with Google reportedly asking for tax registry information to be blocked.

On Tuesday, Google inaugurated new offices – around 50,000 square metres in the historic 1930s Sihlpost building – close to Zurich’s main station. The new premises and existing office space in another district will together be able to house up to 5,000 staff.

Google established a European research and development centre in Switzerland’s largest city in 2004, which currently employs around 2,000 people from 75 countries, mostly working on products such as Google Search, Google Maps, Google Calendar, YouTube and Gmail. Zurich is Google’s biggest engineering research centre outside the US and the third biggest worldwide.

An artificial intelligence research team has been based at the search giant’s new Zurich office since June 2016. It is focusing on applying machine learning to Google products including Search, Translate, Photos and Google’s newly announced Assistant using natural speech recognition and reproduction.

IT hub

Google nurtures close ties with the Swiss Federal Institutes of Technology in Zurich (ETHZ) and Lausanne (EPFL) as well as with local start-ups.

In 2004, Google opened an office in the city centre location of Limmatquai with two staff. It was initiated by the company’s vice-president of engineering, Urs Hölzle, an ETHZ graduate.

As staff grew, Google moved into bigger premises in the Zurich Enge district. In 2009, staff moved again to the purpose-built office on the Hürlimann-Areal complexexternal link, which remains operational.

Zurich has attracted a number of digital and IT companies, such as Facebook, which recently stepped up its presence in Switzerland via its virtual reality subsidiary Oculus. An office was opened in Zurich with ten researchers from the Zurich Eye project.

IBM, Microsoft, Siemens, HP and Cisco Systems, among others, also chose to have a strong presence in Switzerland.

Tax uncertainties

Zurich’s attractions as a place to work are well documented: a high quality of life, multilingual environment, excellent infrastructure and transport links, proximity to world renowned educational and research institutions and IT experts and a generous tax regime for foreign companies.

However, it is unclear how much tax Google is paying in Switzerland. According to the Zurich-based daily Tages-Anzeigerexternal link, Google has asked for tax registry information to be blocked, a measure the Zurich tax authorities describe as “rare”.

The tax regimes of multinationals like Google and Apple have attracted controversy. In 2012, Google chairman Eric Schmidt insisted he was “very proud” of the company’s tax structure and said measures to lower its payments were just “capitalism”.

The Tages-Anzeiger reported that after Schmidt made the comments the Zurich cantonal authorities contacted Google officials to negotiate a higher tax rate, but the results of their conversations are unknown. Zurich mayor Corine Mauch merely stated afterwards that Google was “one of the 100 largest taxpayers” in Zurich.

In 2013, the Tages-Anzeiger reported that Google Zurich paid very little corporate tax in Switzerland. It claimed that Google’s European operations had a complex tax structure involving routing money through Ireland, the Netherlands and the Bermuda Islands.

In Britain, where Google has also built up a large presence, Google agreed last January to pay the British government £130 million (CHF160 million) in back taxes in a deal which opposition parties in the country criticised as too little in view of the size of Google’s British revenues.

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