Hollande Gets the Business Itch

May 8th, 2013
in Op Ed, syndication

Written by

After the bludgeoning that business got from tax increases last year when the Socialist Party's Francois Hollande became president, he has changed his tune, at least when talking to the business community, and has become all pro-business.

One waits expectantly to see what degree of horror this provokes on the left of his Socialist Party and from the more extreme trade union organisations. Jean-Luc Melenchon, the extreme left's self-declared leader, has already delivered the ultimate insult:

"This government is even worse than Sarkozy's!"

Addressing a grand get-together - to call it a 'love-in' would not be accurate - of business and government at a so-called Assises de l'entrepreneuriat on April 28-29, the president addressed the closing session, held in the salle de fete of the Elysée Palace, an unusual gesture in itself.

Follow up:

In hope, through a programme of measures to do just this, to -

"valorise (enhance the value of) the place of the entrepreneur in French society,"

he said that by speaking directly to those,

"who take risks every day for our economy and employment."

This followed on the encomium at the opening session by Fleur Pellerin, minister for small companies, innovation and digitisation, who was equally lyrical:

"It is clear: the way to the recovery of the economy, which will enable us to win the battle for employment and social cohesion, as we are resolved to do, is by supporting France's businesses."

The tone of comments after the president's speech, said Le Figaro, was this:

"What is new is that the left is adopting a discourse which is so positive about the role of business; this is a very strong signal."

Ho, hum. The proof of this pudding will be in the eating. Not all the first bites were equally pleasant.

Raising the Cost of Closures

On the same day, the Socialist Party in the National Assembly tabled a long-promised measure to make it obligatory for a company that wishes to close an industrial business operation to find a new buyer for the site of the operations, if it is judged commercially viable.

If it cannot or will not, the company will be penalised by raising the cost of any redundancy programmes (plans sociales as they are called in French), as well as by increasing the charges for cleaning up the site and restoring it to a state in which it can be used for other purposes.

The thinking behind all this is that the government will make it crystal clear to business that want to close a site that, in the opinion of the owner, does not have a viable future, it will cost the owner a lot more to do that than to keep it running and keep paying the employees.

This in effect toughens up the existing practice, which is that a company offers the site to all-comers, but does not have to sell it unless the existing owners judge that the would-be owner could make the operation viable, but does no have to sell it if the new owner would be in direct competition with the seller.

In several recent high-profile cases, including the ArcelorMittal steelworks at Florange in north-east France and the Petroplus oil refinery, no buyers were forthcoming.

Who decides whether an operation might in future be commercially viable? The trade unions will say that it is, often receiving the backing of the relevant local authorities, but the seller obviously would not want to close the site if he thought it had a viable future.

Many other arguments can and have been in practice advanced, such as a favourite with the trade unions that if the business group that owns the site is making a profit, it has no business closing a bit of the business that happens to make a loss. The tribunals (courts) that deal with these cases often seem to lean over backwards to support the trade union case.

Another issue is that a site might be viable if the buyer also acquired the technology, including patents rights, but under present law the seller cannot be forced to sell the technology.

The proposed legislation is regarded by employers as serious infringement of the management's liberty to run a business as the owner thinks best.

In theory, this legislation ought to make industrialists who are thinking of investing in production in France to think twice about the costs of terminating the operation, but, of course, that is not what a business has most in mind when starting something up, which may not be ripe for closure for several decades.

Barriers to Hostile Public Offers

The same Bill will include measures to inhibit the "rampant" take over of French firms by foreigners through public share offers, according to a report here on April 30.

The proposals will lower the barrier at which it is obligatory for a listed company to make a public offer from 30 to 20% of the capital owned, the generalisation of a doubling of the weight accorded to shares owned for more than two years, the reinforcement of the role of company committees (management/trade union) on issues of transparence, and the possibility of bringing in the state to mediate with a view to improving the terms and guarantees as affecting the employees.

Feeding the Pigeons

To return to the president's proposals for being helpful to entrepreneurs, the president, playing the role of Salomon, handed down his verdict on a dispute between business start-up specialists and the government over the taxation of capital on the sale of a business.

The troubles arose from the 2013 Finance Bill, which brought the tax on capital into line with tax on income. This meant that the tax on selling a business would come to 65 %, including social charges, even more if wealth tax was involved.

A movement, which became known as "the pigeons" (those who were being plucked), among start-up specialists, more particularly of internet businesses, sprang into being to protest against this legislation.

After all, they could say, why should they pay 65 % or more if they sold the business when the tax on a life assurance policy was in single digits?

After wading through a lot of text, trying to make sense of it first the hard way, using my own brain, and then the easy way, using Google translate, which was even less useful (there was one delightful mistranslation which ran thus: a contractor who will retire after a minimum of ten years in prison for his actions), I give up trying to explain it all.

In essence, the revised measures mean that the tax on capital in these cases will be 24 %, which is in line with the European average (26%), but how you get to this figure through a series of variable rebates and deductions is complicated beyond belief and not equal for all (Equality is there to be abused, is one of the unspoken principles most frequently applied in the land that claims to have invented the Rights of Man).

The pigeons and their friends and relations seem to have been reasonably mollified by the salomonic process.

What Else?

  • The creation of a "business visa", a simplified procedure for issuing a residence permit for someone (from outside the European Union, presumably) intending to set up a business in France.
  • A special programme by the Public Investment Bank for investment in businesses in the quartiers defavorises in Paris suburbs and similar quarters elsewhere.
  • Opening up the schools so that children can get to know about the world of jobs and business.
  • A higher education programme for a course in business creation.

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