3 Changes in France the #geonpi Have Not Prevented (yet)

Oct 9, 2012
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French tech news has been pretty shook up this past week with readers and journalists trying to keep up to date with the ever changing announcements of how the new tax laws will affect entrepreneurs and investors – the globally known Pigeon movement has achieved a lot of amazing things in such a short time, thanks to their post facto spokesman ISAI general manager Jean-David Chamboredon. It is now expected that the back-peddling government will keep the capital gains tax at 30,5% (15% tax +15,5% CRDS tax to pay off debt) for both entrepreneurs and business angels. While the #geonpi are still waiting until all the changes are officially announced by the government, it seems there are a few more issues that have slipped through the cracks.

  1. Auto-Entrepreneur Status: Amid all the hubbub about the capital gain’s tax, for which JDC is still fighting in an official capacity, it seems that one of the original headlines – the death of the Auto-Entrepreneur status – has been forgotten. The status was originally designed by Sarkozy to allow entrepreneurs to easily create a structure under which they could begin to test their ideas – or to lower the official unemployment figures, depending on who you ask. The status has low tax rates, but a recent study by the Auto-Entrepreneur Federation showed that the average annual income for auto-entrepreneurs was €6,471, or 539€ per month. The proposed tax changes for 2013 will eliminate the tax benefits for the status, which were the original incentive for most of those who became auto-entrepreneurs. The Federation head Francois Bayrou has been quite vocal about his discontent, but even he has been pacified by the very fact that he voted for Francois Hollande[FR]. Most startup entrepreneurs don’t take this status, but it represents the ability to step outside the normal salary cycle in France; the proposed change will only increase tax on revenue generated under the status, reportedly by 2-3%.
  2. Amazon, Google, Apple, & Microsoft: Coming around for a second time, the proposed “Google Tax” will be up for debate in December, based on the results of a commissioned study by the government on Google’s taxation in France. The study was commissioned back in July, after it came out that Google only paid a 3,2% tax rate. The system is called the Double Irish, and uses the advantages of Ireland’s corporate tax rate in conjunction with tax havens like Bermuda to minimize where revenue can be taxed. Microsoft had recently been in compliance, like good guy IBM (cf: LeFigaro), but has since fallen off the wagon, with its corporate tax not lining up with the revenue it’s generating, though entirely legal. This idea has been visited before – it failed – but times are tough and the government’s trying to squeeze pennies out of big companies like Google. Remember when China tried to get Google to comply with their government demands? Yeah, that went over super well.
  3. Anti-Competitive Mobile Operator Government Intervention: One of our contributors, Alex Lodola, brought this little gem to my attention – apparently the government will present measures in two weeks in order to regulate Mobile operators, three of which have been affected since the 4th, Free Mobile, arrived on the scene. Originally reported on LeFigaro[FR], it seems that the government has finally come to a head on the Mobile Drama in France, which arguably started when Bouygues Telecom owner Martin Bouygues, the 377th richest man alive with a network of $3 Billion, complained that Free Mobile’s entrance into the French market has made it impossible for the other telecom companies to compete. While Free may not have hurt giants like French Telecom, SFR has switched out a CEO & Bouygues has been laying off massive amounts of employees, having been the most affected by Free Mobile according to Le Figaro. In addition, the government’s announcement will also include recommendation as to whether telecom companies should pursue 4G networks on the 1800Mhz frequency, the frequency on which the iPhone5 exclusively operates. While ultimately the telecom regulation authority ARCEP will have the final say in this matter, it would give Bouygues a huge advantage in the Mobile market, as they are best poised to get the 1st iPhone-compatible 4G network up in France.

Now before you get all angry and tell me “but this isn’t what the Pigeon Movement is about,” allow me to point out that the Pigeon Movement can be about whatever it wants; it is 10 days old and represents a mobilization of tech-aware citizens who wish to see their opinions heard by the government. These three changes are all bad for tech & entrepreneurship in France – perhaps not as drastically as their other priorities, but important nonetheless.

Lastly, I thought I’d leave you with the suggestions given to me by Jerome Camblain of Camblain Advisory - let me know if you have anything to add: