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Zurich Looking At Multinational Tax

by Ulrika Lomas,, Brussels

31 January 2013

Tax authorities in the Swiss canton of Zurich are said to be in negotiations with Google, demanding that the US Internet giant pay more in tax, suggesting that Switzerland, like other European countries, is rethinking the way in which multinationals are taxed.

Google Switzerland is said to have come under increasing fire recently for paying hardly any corporation tax in Switzerland. However, it is also believed that Google benefits from tax relief accorded by Zurich in return for high levels of corporate investment in the Swiss canton.

The practice of cantons in Switzerland according favorable corporate tax rates to multinationals under certain provisos has, however, drawn fierce and mounting criticism from the European Union, which has said that the cantonal tax regimes amount to state aid and has therefore urged Switzerland to rectify the situation to ensure that an appropriate level of corporation tax is paid.

Refuting claims that the US Internet giant is evading its tax obligations in Switzerland, Matthias Meyer, a spokesman for Google, insisted that the company is already paying a substantial contribution in wage and corporation taxes and complying with all tax requirements in the Confederation.

Located in Zurich, Google Switzerland is Google’s largest development center outside of the US, employing over 800 staff. Google also has plans to carry out further investment in the area, having already secured new offices with the aim of recruiting an additional 300 staff.

Google was one of a handful of large multinationals which recently came under fire in the UK for paying relatively small amounts of corporate tax compared with sales. However, in a stern defense of his company, Google's vice-president in northern and central Europe Matt Brittin took offense at UK lawmakers' accusations of "immoral" accounting practices. "I find it frustrating when we're criticized because I'm not immoral and neither is Google. If Google were immoral, I would not be working here. I'm proud of the way we operate," he said.

He went on to observe that members of parliament were criticizing companies for using a system that parliament itself had created. "Google plays by the rules set by politicians. The only people who really have choices are politicians who set the tax rates."

Brittin insisted that its status as a US company shaped its tax arrangements in the UK: "I would love it if Google had been invented in Cambridge. If Google had been created there and was a British business we'd be having a very different conversation now. We would be paying tax based on where our product was created – in that case, we'd be paying the majority of our tax here and operating in the US in a very different way."

TAGS: tax | corporation tax | multinationals | Switzerland

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