Zurich wants Google Switzerland to stump up more tax - paper

People walk past a logo next to the main entrance of the Google building in Zurich March 9, 2011.

ZURICH (Reuters) - Tax authorities in Zurich are demanding that Google(GOOG.O) pay more tax, a Swiss newspaper reported on Friday, citing undisclosed sources with knowledge of the matter.

A decision by Zurich to open talks with Google may indicate that Switzerland intends to take a tougher stance on multinational companies which have minimised their tax bills by chanelling revenues through low-tax jurisdictions.

Zurich, where Google runs its largest office outside of the U.S., gets "virtually no" corporate tax from the internet search giant, and is negotiating a higher tax level, according to Friday's edition of Tages-Anzeiger.

Google could not be reached for comment. Tax authorities in Zurich said they could not comment on individual companies.

Firms like Google, Starbucks(SBUX.O) and Vodafone(VOD.L) are being steadily targeted by governments scrambling to mend holes in their budgets caused by the financial crisis.

Switzerland is also coming under pressure from the European Union (EU) to ensure multinational companies are paying an appropriate rate of tax.

The Alpine state, which is not part of the EU, has been criticised by Brussels for allowing cantons, or states, to give favourable tax rates to multinational firms providing they meet certain local criteria such as job creation.

Zurich's reported talks with Google follow an agreement by Brazil's Vale SA, the world's second largest miner by market value, to pay 212 million Swiss francs to the Swiss federal government, and 663 million reais to Brazil's Minas Gerais state, to settle tax cases dating back to 2006.

Switzerland has previously refuted the EU claim that its cantonal tax system amounts to unauthorised state aid.

Zurich tax authority director Bruno Faessler told Reuters that while different Swiss cantons were free to set the rates of corporate tax they applied, he denied they are negotiated with companies.

"Companies are taxed on their net profits and their capital if their head office is in Zurich," he said.

"If not, profits of their branches and their properties in the City of Zurich are subject of taxation."

On Thursday France said it will seek payment of back taxes from big internet companies who have used legal loopholes to reduce their tax bill.

French authorities are currently conducting a tax probe of Google and retail search engine Amazon (AMZN.O).

(Reporting by Martin de Sa'Pinto; Editing by Hans-Juergen Peters)