Investors & Entrepreneurs: forget everything you've heard about taxes in France in the last 6 months.

Feb 6, 2013
Vote on Hacker News

2230355509In the past 6 months, there have been a lot of new tax ideas thrown out around France, most of which has resulted in smoke & a bad reputation for French businesses & entrepreneurs. Paris went from 6th to 10th in ‘attractiveness for investment’ in just one year according to a recent study reported on LeFigaro, and has left a bad taste in the mouths of many entrepreneurs and investors. Phrases like Hollande’s “I hate the rich” and “75% tax” and “impossible to create a startup in France” have become the norm when I go to European tech conferences, and questions like “so how hard is it to create a startup in Paris? Are there startups there?” have become all too common. Finally, it seems we can put every one of 2012′s terrible communication strategies to bed.

  1. The “75% Tax” – 75% of France now Opposed – proposed last year, the tax was meant to be applied to roughly 1,400 French individuals who have an individual revenue that exceeds 1 Million euros (that’s not entrepreneurs, and it’s not investors). It was a stupid tax, and France got lucky because it was declared unconstitutional on a technicality - it targeted the individual and not the household/tax bracket – but the damage was already done. While it may not be quite 75%, recent polls show that the majority of French people don’t see this tax, or a new form of it which targets households making 1.5 Million euros as a solution to France’s problems, and are now against it. This tax will likely not see the light of day.
  2. The Capital Gains Tax Hike all but dead: an interview in Les Echos, shared this morning by the Pigeons Movement leader Jean-David Chamboredon, shows the first signs that the government is back-pedaling on its promise to align individual taxes and capital gains tax. “We disaligned the interests of different actors, which can be dangerous in the long term, and focuses only on the short-term goals…. We need to try to define a tax regime – different from the common law – which is reduced due to the high risks taken.” Well shit, that sounds a lot to me like a separate tax structure for startups, as well as an end to high capital gains taxes. There are some other good quotes (in French, of course) in the aforementioned article from the government that give credence to he idea that the government is making its albeit slow switch to a pro-business attitude, or at least a pro-startup.
  3. The Google Tax – more like the Google Fund: Many have disagreed with me on this when I wrote last Friday that Google got a huge victory with this measily 60 million euro fund and a ‘commercial agreement’ whose terms are not yet disclosed; other journalists have said that Google set a precedent that it is willing to pay for the right to link to publishers – I argue that Google saw this as the lesser of two outcomes, the other of which involved backing out of the French market. Google has caused major damage to the media industry, which relied on advertising to function – there is no doubt that they will have to give a little charity to the children they’ve orphaned – call it recompense for their actions. One thing is clear: if online media is to survive, for now, it’s going to have to play ball with Google.

The French Government, along with several other European countries, is still in talks about how to fix the small taxes that internet companies pay in their tax-optimized strategy. The talk of taxing user data has been proposed in France – there’s a great report about it in VentureBeat by the idea’s author, Nicholas Colin – for anyone watching from a country where Google does pay taxes (that’s nowhere, if you’re wondering), just know that Google makes roughly a billion euros off of the French market alone, and pays just a few million in taxes, less than 5% of their estimated revenue, which they funnel through Ireland, Holland, and then Bermuda to avoid paying in the US.

While I believe in the open internet, I also realize that if you’re taking money from a country’s economy without paying the toll that everyone else is paying, it’s only a matter of time before they come ’round knocking asking for their share.