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Tuesday, April 30, 2013 - Page updated at 06:30 p.m.
France capitulates, cuts capital-gains taxes
By ELAINE GANLEYSYLVIE CORBET
The Associated Press
PARIS — President François Hollande announced Monday a series of measures to encourage the French entrepreneurial spirit, including drastic cuts in capital-gains taxes — up to 65 percent — for the sale of small companies, and a plan to make France startup friendly.
Hollande, looking to stimulate flagging growth and cut into the nation’s 10.6 percent jobless rate, also ordered the Interior Ministry to introduce visas for foreign entrepreneurs and to speed up the process to make the country more attractive to foreign professionals.
“Half of the entrepreneurs of Silicon Valley are immigrants,” Hollande said in a speech before some 300 entrepreneurs at the Elysee Palace.
The Socialist president has been viewed by some as an anti-business leader, and he infuriated entrepreneurs last year by proposing increased taxes on investments. In response, entrepreneurs, calling themselves “pigeons” — French slang for someone who has been duped — launched an online opposition campaign that quickly got tens of thousands of “likes” on Facebook and trended on Twitter.
Hollande, trying to return to the good graces of entrepreneurs, said he was undoing that plan and simplifying the system.
“There are no less than 40 formulas for dealing with capital gains ... 40 different ones. And now there will be but one,” Hollande said.
He enumerated a graded scale for tax breaks on capital gains for entrepreneurs who bought startups: 65 percent if the company has been held at least eight years and 50 percent after two years.
The tax advantage rises to 85 percent if companies are less than 10 years old, are being passed on to family members or the owner is retiring.
Experts say Hollande’s initial plan would have meant an effective tax rate of 60 percent, compared with 15 percent on U.S. capital gains. France has been raising taxes to fill a 30 billion-euro hole in the budget and meet a deficit target of 3 percent — set by the eurozone — of its 1.8 trillion-euro gross domestic product.
But small and medium-sized companies are the biggest creators of jobs and drivers of economic growth, and make up 99 percent of businesses in France and the European Union as a whole.
Other measures aimed at boosting the entrepreneurial spirit in France include wiping out the Bank of France notes on companies that fail “so that one can have a second or a third chance,” and creating “international houses,” starting in the United States and in Asia, to help medium-sized French companies to branch out abroad or encourage exports.
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