Bowing in 'pigeon' fight, France slashes taxes

Bowing to pressure, French government slashing capital gains tax cuts some companies

Associated Press
Bowing in 'pigeon' fight, France slashes taxes
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France's President Francois Hollande arrives to deliver a speech to ministers and members of the White Book of Defense and National Security committee at the Elysee presidential palace in Paris, Monday April 29, 2013. France said Monday it will cut another 24,000 military jobs by 2019 as it attempts to maintain a force ready to deal with global threats at the time when the bill for France's decades of deficit spending is due. (AP Photo/Bertrand Langlois, Pool)

PARIS (AP) -- President Francois Hollande announced on 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 start-up 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. "We must waste no talent."

The Socialist president has been viewed by some as an anti-business leader, and 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 start-ups: 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 when 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.

Hollande called the new system "balanced," ''just" and "durable."

"It is enterprises that create wealth and, therefore, jobs," the president said.

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.

He did not provide details or say when the government-run "international houses" would be in place.

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