Zurich prospers as foreign firms relocate

Kraft is moving its European headquarters to this building,"Light Cube", in Opfikon near Zurich Keystone

Zurich is poised for a further influx of foreign firms and workers after the relocation of Kraft Foods' European headquarters and the expansion of Google this year.

The moves earlier this month from the two United States giants offer further evidence that the region offers prime conditions for companies, according to the Greater Zurich Area relocation service.

Google, the world’s leading website search engine, will radically expand its existing business in Zurich by moving to larger premises at the Hürlimann industrial complex in the city.

The company is secretive about the exact number of workers it employs in Zurich. Most estimates put the current figure at 200 and the new premises provide enough space for a total of 1,600.

“Zurich will be the biggest Google location outside the US,” spokesman Stefan Keuchel said. The European headquarters is only its second software development centre abroad along with an office in India.

Google’s expansion plans followed hard on the heels of news that the world’s second largest food manufacturer, Kraft Foods, will relocate its European headquarters from London and Vienna to Zurich by the middle of the year.

Kraft has rented office space that can house up to 600 people near Zurich airport.

Tax controversy

“The relocation of headquarters and the nice growth of Google that we have seen in the last couple of months shows that we have very good basic conditions in the region,” commented Greater Zurich Area chief executive Willi Meier.

Those conditions include good transport links, a strong financial presence, a quality of life that attracts a high calibre workforce and research facilities offered by the Federal Institute of Technology (ETH) and Zurich University, Meier added.

Google has recruited ETH spin-off technology firm Cybercity to help develop its popular interactive map service Google Earth. Cybercity is utilising its skills to put detailed facades on blank buildings on the internet program.

A more controversial lure for foreign companies is the low corporate tax rates offered by many cantons in Switzerland.

The Swiss strategy of offering tax breaks has been openly criticised by neighbouring countries and has attracted a formal protest from the European Union for allegedly creating unfair competition.

But Meier dismissed the notion that firms such as Kraft are merely moving from other countries to reduce the tax burden.

“Taxes are definitely an important factor, but when it comes to a strategic decision from a company to relocate they evaluate a location from a business perspective in relation to general operational conditions,” he said.

“It’s no use sitting in a place with low taxes if you can’t generate profits in this place. The overall conditions are the more important factor but if a company can save taxes then they can reinvest that money in their businesses.”

Still competitive

The competition among cantons to set the lowest business tax was intensified at the beginning of last year when Obwalden slashed its rates to a Swiss low of just 6.6 per cent.

Obwalden attracted 376 new firms in the first 11 months of 2006, three times more than in the previous year. But Meier insists the Zurich region is not afraid of the increased competition.

“The tax competition among Swiss cantons makes Switzerland as a whole more competitive on an international basis. Kraft has chosen Zurich despite the fact that we don’t have the lowest tax rate in Switzerland, but on an international scale its still a very competitive rate,” he said.

swissinfo, Matthew Allen in Zurich

Key facts

Selected business tax rates (KPMG figures):
Japan 40.7%, US 40%, Germany 38.3%, Switzerland 21.3%, Republic of Ireland 12.5%, Cyprus 10%
Selected cantonal rates (federal, cantonal and municipal):
Obwalden 13.1%, Schwyz 15.6%, Zug 16.4%, Zurich 21.3%, Graubünden 29.1%

In brief

The Greater Zurich Area non-profit company helps foreign firms relocate in the region. It covers a broad area, including cantons Zurich, Schaffhausen, Schwyz, Glarus, Graubünden, Solothurn and Aargau.

In 2005, the area attracted 104 new foreign firms, generating some 1,800 jobs. Figures are not yet available for last year, but Willi Meier expects them to be similar.

US software giant Microsoft opened a development centre in Zurich last summer after buying out Zurich-based start up company media-streams.com. Leading technology business magazine Red Herring also relocated its European operations to the city in 2006.