French volte-face on new capital gains tax measure
THE FRENCH government is set to reverse a tax increase it announced just last week after an online campaign against it by small-business owners.
A group of entrepreneurs calling themselves “les pigeons” – the bird is also slang for a mug or a sucker – created a stir this week with a high-profile mobilisation through social media. They claimed that small businesses were playing the fall guys for France’s economic troubles and that the almost doubling of the rate of capital gains tax on the sale of companies would crush entrepreneurial sprit in the country.
The government’s climbdown over the measure, which was due to raise €2 billion, added to speculation that France could need a supplementary budget next year if it is to stick to its deficit target of 3 per cent of GDP.
“We will probably have to change it,” finance minister Pierre Moscovici said of the capital gains tax on French radio yesterday. “If there are measures that will have a shock or dissuade investment in new, innovative companies, then we’ll have to look at it again,” he said.
Currently, entrepreneurs who sell their businesses pay capital gains tax at a rate of 19 per cent. However, under the 2013 budget, most would have to pay at least 45 per cent, a new rate imposed on any income over €150,000.
The “pigeon” movement was created by several French entrepreneurs following the publication of an opinion piece on the site of business newspaper La Tribune last Friday. The article, by the venture capitalist Jean-David Chamboredon, accused the government of “almost sadistic demotivation” and of “breaking dreams”.
In the toughest French budget in 30 years, the government announced plans to reduce the deficit next year by raising an extra €20 billion through new taxes and a further €10 billion through spending cuts. It is also introducing a temporary 75 per cent tax rate on income over €1 million.
Several French soccer organisations said the tax would have a “disastrous effect” on their recruiting, while L’Oréal chief executive Jean-Paul Agon warned the new rate would make it harder for French firms to attract and keep the best staff. Mr Moscovici said there was no sign of a massive exodus of wealthy people from France, as some business leaders claimed.