Internet giants Google could spearhead the transformation of Bermuda into a ‘Silicon Island’ hub for high technology, The Royal Gazette can reveal.

It is believed the global search engine firm, based in California’s Silicon Valley, has been locked in talks with the new Bermuda Business Development Agency (BDA) with a view to setting up a physical presence on the Island.

Google — although it has a subsidiary based on the Island for tax purposes — does not have any operations in Bermuda.

And it is understood that Google is only one of the major players in the hi-tech world targeted as Bermuda tries to re-engineer its economy with new businesses.

BDA chief executive Ross Webber declined to identify potential targets for the creation of a hi-tech hub on the Island.

But he said: “There are a number of companies that have a presence here but not much of a physical presence.

“A lot of these companies do have large US operations and it’s convenient for them to have a hub of operations near where they are.

“We are proposing Bermuda as that ideal location for them, particularly for things like research and development labs, product development, intellectual property, and software engineering development.”

But he warned: “It’s a long haul because companies that are this size have a lot of processes to go through to set up that kind of operation, but we are having these discussions.”

Mr Webber was speaking after he outlined the role of the BDA and some of its achievements to Hamilton Rotary Club yesterday.

The BDA was set up last year as a public/private partnership with the aim of reviving Bermuda’s flagging economy.

Mr Webber told the meeting at the Royal Hamilton Amateur Dinghy Club in Paget that the organisation was working to bring in new types of business — like biomedicine, life sciences technology, intellectual property and e-commerce.

He said: “This is one of those pillars that we don’t particularly talk about publicly because we feel the development of these ideas are the cornerstones of our economic diversification strategies and our competitive edge.”

Mr Webber said: “nearshore talent pipeline” — the transfer of talent from a nearby country — was a key part of the BDA’s focus.

He added: “I cannot talk too much about this but will just say that this week I have been in direct dialogue with the senior principals of leading international technology companies.

“We have a couple of proposals where we feel that they could set up larger physical presences here on the Island.”

Google has come under fire over the last few years after it was revealed it cuts its tax bills by using a network of global subsidiaries — with figures released last year showing if funnelled $12 billion through its Bermuda arm.

Previous revelations about Google’s tax arrangements have led UK Parliamentarians to denounce them as “immoral” and led to demands that Bermuda change its laws.

Google said it follows tax rules in all the countries it operates in — and pays little tax in the UK because its profits are not generated by UK employees.

The UK arm of the firm, as well as other European operations, are designated as providers of marketing services to Google Ireland.

But Google declares little profit in Ireland because it sends nearly all the cash it gets to the Bermuda affiliate, Google Ireland Holdings, in the form of licence fees for use of Google intellectual property.

But — if Google was to have a physical presence in Bermuda and conduct some of its business from here — it could defuse some of the controversy around its tax arrangements.

Mr Webber added that the BDA was also working with life sciences firms in a bid to attract them to the Island, while Canadian e-tailers were also in their sights.

He explained: “We haven’t seen the level of business flowing from Canada we expected.”

But he added that the BDA had changed its approach to Canada — with an new emphasis placed on the advantages of the tax information exchange agreement (TIEA) between the two countries for Canadian businesses.

In addition, international arbitration work is being sought and Mr Webber said: “We are generating some positive media coverage about using Bermuda as a centre for arbitrations.”

Mr Webber added: “There are other irons in the fire, but I need them to crystallise a little bit more before we go public.”