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"Anyway, it seems like a mystery to me why tech firms like Google set up shop in small expensive Zurich instead of say cheaper, bigger Barcelona or Vienna, for example."

The reason is simple: tax-evation and the like, Swiss is well known for it around Europe. That it hasn't been dealt with is not strange since we live in the age of hidden plutocracy (trading outposts and the like exist in many countries for the rich to circumvent the law - this should put Brexit in a new light for some).

Things are slowly changing for the better as people start to realise what is the real problem within society (or rather outside society), but seing as what happened to the "Panama" leak where the concentraded information wasn't released and basically ICIJ sat on it for a year or so (the initial estimates during that time dwindles from over $62T to less than $30T, the official cause was accounting for the same money several times).

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> The reason is simple: tax-evation and the like

Source? Switzerland is famous for its private banking sector and it used to be easy to hide assets for individuals (with FACTA and tax data sharing, I don't think it's as popular now, or at least the minimum amount required is way higher since banks don't want the risk). Unlike Ireland, I'm not aware of Switzerland being commonly used to reduce corporate tax (at least in IT).

Here's a well-known Canadian Supreme Court case about transfer pricing that highlights the role of a Swiss subsidiary in a scheme to dramatically reduce taxes on income earned from selling pharmaceuticals: https://en.wikipedia.org/wiki/Canada_v_GlaxoSmithKline_Inc

Transfer pricing is not 'tax evasion' - it's 'tax avoidance'.

To be clear, 'tax evasion' is illegal.

Most companies do what they can to avoid paying taxes, which is rational in some ways, but they usually don't do anything illegal.

It's important that we don't mix the two :)

What's the difference? Does 'tax evasion' involve falsehoods?

Tax avoidance is legal - it's reducing your income through legal means.

Where it gets prickly is when companies game the system and find ways to reduce tax that the sovereign clearly would outlaw, but cannot for structural or political reasons. Still not illegal, but not exactly awesome either.

The 'difference' is one is illegal.

If you have $1M in a Swiss bank account earning capital gains, and don't declare it to the IRS - that's 'tax evasion'.

If you have a company in Switzerland generating revenue, and decide not to bring back your profits to America to get hit with another tax, and just let it sit in Switzlerland - that's a 'tax avoidance' strategy.

'Tax evasion' = illegal.

'Tax avoidance' = doing everything you can within the boundaries of the law to not pay taxes. There are some wierd loopholes due to the way taxation works across borders.

Yes, tax evasion involves lying to the tax authorities.

Tax avoidance does not. It involves complete honesty with the tax authorities, who then charge you less tax, as the rules state they should. The definition of "avoidance" is therefore intensely political - avoidance tends to be defined as lawful behaviour by other people the speaker would prefer paying for government instead of them!

Important to whom? I intentionally do not make a distinction. I'm not going to start, because the point is important to me.

The distinction matters to: decision-makers at the firm in question, shareholders of the firm in question, the sovereign collecting the taxes[1]. And given the the dispute resolution with large corps' tax issues rarely involves people going to jail or even admissions of fault, I'm not sure why anyone outside of that group should care about the (extremely blurry) legality boundaries.

Bottom line: most of the rest of us have no obligation to care about their word-choice sensitivities and are free to use language for our own ends.

[1] Possibly noninclusive list.

Well, you have to draw a line somewhere between ethical tax minimization and unethical tax evasion. Where do you draw it?

This is a continuum that stretches from clearly illegal schemes through hazy waters, into calm water like deducting salaries and cost of goods sold from revenue and paying tax on the balance. For individuals "tax avoidance" includes deducting charity contributions and taking advantage of things like deductions for dependents. If that is not "unethical" to you then you need to make a distinction between tax avoidance and tax evasion.

Many people believe "is it legal" is a good line to use. You may differ on that, but you can't escape the dichotomy.

"Important to whom?"

Important to lawful civilizations.

If you think that there should be better regulations around setting transfer pricing, then vote for it.

Unless companies are breaking the law, then there is a very profound 'distinction'.

Some tax issues are easily resolved, or at least, easily improved. 'Transfer pricing' is not one of them. It's very thorny.

I for one think that Apple's argument of 'the innovation and design is done in California - not Ireland' - is pretty reasonable.

Im fact - the US government should be reaping most of the tax dollars that Apple generates, not Ireland.

That said - if they have operations in Ireland they should be paying taxes there.

I think that a company should pay it's 'primary corporate tax' in the place where it is incorporated and has it's major operations.

And then ancilliary countries like Ireland can tax them at a corporate rate, but discounted for what they payed in America. Ireland's biggest tax receipts from Apple should come from VAT - which is the fairest tax of them all, because it's applied to each iPhone sale in Ireland, not France or wherever.

Currently - it's upside down: if a Canadian company has a subsidiary in France, they pay their corp tax rate in France for sales there - and then only a 4% remittance fee to Canada. To me that's backwards.

The American system is the worst: American companies pay full tax overseas - and then full tax back in America. Plus American corporate taxes are high.

> Important to lawful civilizations.

You seem to have misread. I was arguing about word choice about tax policy, not tax policy. I choose to recognize a range of behavior as "evasion". That's what we're talking about. None of your post is relevant to what I wrote.

The definition of 'tax evasion' is 'the illegal nonpayment or underpayment of tax'.

So - it's not up to you to decide what is 'tax evasion'.

You can commandeer the term if you want, but you'd have to be very clear that you are doing that.

This case was actually about whether or not it was legal. It was a mixed decision (seen as being in favour of GlaxoSmithKline) that settled confidentially after the Supreme Court case: http://business.financialpost.com/legal-post/glaxosmithkline...

Iunno, Ebay likes to print in every email and invoice that I'm dealing with their Swiss subsidiary, even though I'm in Canada. I'm sure it's for tax purposes.

Switzerland managed to build a highly specialized economy in several high-value sectors: pharma, banking, computer science, micro-mechanics, manufacturing machines...

ok, why all the high tech industries that come to my mind are based in SV, UK, SE Asia, Japan but I can't thing of anything in Switzerland? Honestly it is the first time in my life that I hear the association computer science - Switzerland..

Because you have no interest in micro-mechanics or manufacturing machines? ETH and EPFL are one of the best universities in the world for CS. No one else than yourself is responsible for your own biases.

I don't care if you have the best university in the world. I was speaking about companies and there is no hardware/software world-leading class company in Switzerland that I know. I still didn't see one in all the comments and no down voter provided one single example.

> Honestly it is the first time in my life that I hear the association computer science - Switzerland..

Some names you might recognize:

* Niklaus Wirth (Pascal, Modula-II, Oberon etc.; retired professor at ETHZ)

* Jurg Gutknecht (Oberon; EHTZ)

* Erich Gamma (one of the "Gang of Four" behind the Design Patterns book; co-wrote JUnit; studied at University of Zurich)

* Urs Hölzle (Google SVP of Technical Infrastructure at Google; studied at ETHZ)

A lot of people can also be traced back to Wirth. E.g. Andreas Gal that did his thesis on trace trees for JIT compilation is German, and did his thesis at UC Irvine, but his advisor was professor Michael Franz who did his thesis on runtime code generation before Java was released under Niklaus Wirth.

> A lot of people can also be traced back to Wirth.

Martin Odersky, the creator of Scala and javac, was born in Germany but received his PhD in Zurich, at EHTZ, under Wirth's supervision[1]. Odersky is now a professor in Lausanne at EPFL [2].

[1] https://en.wikipedia.org/wiki/Martin_Odersky

[2] https://people.epfl.ch/martin.odersky/bio?lang=en&cvlang=en

I was clearly speaking about companies. In uk there is (was until one month ago) Arm holdings, in Silicon Valley I guess you should know, Samsung should be quite famous in the world, Sony and all the other Japanese companies the same. Which big software/hardware company famous in all the world I'm missing in Switzerland?

I was responding to the association with computer science.

In terms of companies, here's a few of the best known I'm aware of:

An old infamous one:

* https://en.wikipedia.org/wiki/Crypto_AG

And a couple of major international ones:

* Logitech (founded in Apples, Vaud)

* STMicroelectronics (headquartered in Geneva; though it was a merger of a French and an Italian company)

And a new but still quite well known security hardware one:

* Silent Circle (security hardened smartphones)

But as other have pointed out, in software/hardware Switzerland is doing best in R&D, not least because of the high salaries, and a lot of CS grads will also end up going into jobs in companies that are not necessarily hardware/software companies but that need a lot of CS talent (e.g. banks, high tech manufacturing).

The swiss are very strong in biotech. Consider that Genentech, Silicon Valley darling of biotech, is now owned by a Swiss company.

Also pharma/biotech: Novartis, Roche, Synthes...

Pharma is obviously well developed in Switzerland, but what has to do with hardware/software companies?

You will not find companies producing hardware in Switzerland (apart maybe of Logitech). This would be much to expensive, but there are a lot of companies which have their R&D departments in Switzerland.

Also Switzerland strengths, like Germany, is not rooted by the big companies. The small to medium sized companies are the backbone of the success. And naturally those are not as known as an Apple or Samsung.

They did a good job, but please don't forget that they helped themselves by stealing tax money to other nations.

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