It’s no surprise that a search for “tax” brings up quite a number of results in the Rude Baguette. If it’s not a tax on tablets, or inquisitions about taxes on Microsoft, Apple, Google, Amazon, Facebook, or LinkedIn, it seems there’s always something the Government’s got cooking up. This week, however, French tech news took a dark turn when one overzealous L’express journalist took French social network Viadeo to task over revelations that the Social Network was not paying VAT in France.
Well, that’s not exactly true. The now-revisied article notes that the social network doesn’t pay VAT in France on premium subscriptions, which are managed by the San Francisco office, making the action entirely legal and normal.
The outrage is not entirely unfounded. The social network is often called “France’s LinkedIn,” and has received over $50 Million in investment, most recently from the French Sovereign Wealth fund (FSI), including some 10 Million euros in grant money from the government, The conclusion of this journalist, and the many others who re-ran versions of the discovery, is that tech startups receiving money from the French government in one form or another “owe” something to the government, and should create their company in such a way to pay a maximum amount of its taxes in France. Sounds crazy when you don’t just infer it, doesn’t it?
The problem with public Money
Luckily, a combination of internet commenters, tweeters, and almost every French entrepreneur has pointed out that what Viadeo is doing is neither illegal, shocking, or advantageous. California is far from being a tax-haven – most of the aforementioned companies being investigated by the French Government register their revenue in Dublin, and then whisk the rest of to X tax-haven island so they don’t have to register their gains in the US.
Nonetheless, this highlights in bright colors the problem with ‘free money’ from the government – nothing is free. If it isn’t time spent rebutting overzealous journalists trying to drive a stake through your heart, it’s applications, justifications of ‘innovation’ as the government defines it, and, most importantly, time.
The reason Yahoo walked away from the Dailymotion deal wasn’t that the terms were being changed last minute, it’s that that request was coming from a ranking official of the French government, which means that more strings will reveal themselves down the road.
If any company that receives public money is expected to drown itself in overbearing French taxes in the event that it succeeds, or, worse, prevent itself from internationalization in order to remain faithful to the French tax regime, then France will never see a global leader again. Every company has public grant money – Criteo. Criteo. Criteo. Need I say more?
You can’t have your Gateau and Manger it, too
What this ultimately comes down to is that the sentiment represented in this debate, whether representative of the minority or majority, is one of a people that still have not understood what it means to build a global company. This article calls for Viadeo’s head because Viadeo reneged on its duty, the duty that comes along with being put on a pedestal by the French digital community and government. They both want to celebrate Viadeo as an international success and they want it to remain a faithful French company.
Turns out the two are paradoxical. What Viadeo wants, and what it needs, is for the world to forget its French identity. Only then will France be able to reap the successes of the $50M it has invested. I doubt that lost VAT will mean much to the government if they have to write off a $50M investment in a company their own country persecuted.