Mon Mar 19th, 2007 at 04:02:51 PM EST
I was not aware of some of the regulations in France regarding small businesses, so I found some of these changes very interesting, and positive. This likely requires a subscription. It is more than tax cuts, and it sounds like changes in regulations are making a big difference. The government claims that a million small businesses have been created since 2002, 30% more than the previous 5 years.
I hate the way reporters take a good news story, and write it in a way that is at least slightly negative,,,,,like always stressing there is more to do. Is it something in the genes? But here goes:
The climate is still far from ideal, said Raymond Torres, head of employment analysis at the Organization for Economic Cooperation and Development.
``It's more the taxes and the regulations rather than a lack of entrepreneurship that hold France down,'' he said. While France jumped 12 spots in the World Bank's 2007 ``Doing Business'' rankings, it is still ranked as the 35th-best place in the world to start a company.
``The charges for small, new entrepreneurs are much higher in France than in Singapore, the U.S., more than in the U.K.,'' Torres said.
A French company must pay about 40 percent of an employee's salary in labor taxes, one of the highest rates among OECD countries, he said. In the U.K. it's about 20 percent, and in the U.S., 10 percent.
``That makes it difficult for entrepreneurs to hire,'' Torres said.
While France is working on making things more conducive to business creation, it needs to do more, he said.
``It's true that it may be easier to set up your own business in the U.S., but it isn't that difficult in France anymore -- it has changed,'' Andre Marcon, who heads the French Trade Chambers' business support network, said in January.
IMHO it's important to recognize that small businesses often fail
Almost 40 percent of new businesses in France fail in their first three years, figures provided by the Ministry for Small Businesses show.
, so one can't put severe penalties into place that make the failure even harder than it already is--such as jeopardising the home of the owner of a failed small business, or putting laws in place making it hard to get rid of people, because when you just start, it's very easy to make the mistake of over-hiring.
Minister for Small Businesses Renaud Dutreil said a 2005 labor law that eased firing rules for companies with fewer than 20 employees created about 720,000 jobs. Companies were more disposed to hire without the fear of legal battles if they had to reduce staff, he said.
An individual's home no longer can be seized if his business fails. Documents needed to start a new business can be scanned and posted on an Internet portal instead of being sent to three different agencies.
There seems to be a lot of entrepreneurial zeal, and a very dynamic market--not surprising to me.
Marc Rochet, 56, who was chief executive officer of defunct AOM-Air Liberte, started a new airline called L'Avion, which offers business-class-only trips between Paris and New York. He collected 25 million euros from investors and hired 50 employees.
``I could have based my airline in the U.K., where it would have been so much easier,'' he told about 4,000 people at the Entrepreneurs' Fair on Feb. 1 in Paris. ``The burden of red tape is still huge, but it's worth it. The French market is dynamic.''
A survey by Paris-based pollster Ifop for the Trade Chambers and the Entrepreneurs Fair showed that 21 percent of French people want to start their own companies. Almost half of those ages 18 to 24 said they planned to do so.
Does this sound reasonable to those of you that know the French tax system well?
This fiscal year, her first in business, she is benefiting from deferred labor taxes. Next year, she will pay as much as 68 percent in income taxes, far more than the 46 percent rate in the U.S. or 35 percent in the U.K.
``Ideally, I would like to hire one person in the coming months, but I need to expand a bit more and I will have to think twice with the taxes,'' she said.
It just seems very quick for someone just starting their business to get into such a high tax bracket. And actually the top individual rate in the US is 35% for Federal tax, so they must be adding a high state tax rate,,,,and then I'm not sure how they are handling social security.
But anyway, an interesting article, and seemingly some great early results.