Written by Hilary Barnes
It is one thing for an international organisation of 27 European countries to adopt an economic model that in the view of such renowned economists as Joseph Stiglitz and Paul Krugman is “suicidal“, but it seems even more bizarre that a country should adopt a tax system that appears designed to extinguish the companies that should provide the foundation of the nation’s future prosperity.
The economic model is, as readers have no doubt guessed, the treaty-based obligation on all member states of the European Union to achieve a rapid reduction in budget deficits at the same time as the private sector is working off its debts, guaranteeing recession for an extended period of years.
In the fourth quarter of 2012 this process left only a handful of East European countries with any in real increase in GDP and is confidently expected to send the EU and the euro zone into recession this year. It has sent unemployment to over 25 % in Greece and Spain and almost 20 % in Portugal.
The extinction of its innovating growth companies is what France seems to be heading for, according to Bernard Charles, CEO of Dassault Systemes, a world leader 3D design software which has transformed the way in which products are designed and produced. Dassault Systems has about 10,000 employees world wide and has doubled turnover in five years to about €2bn in 2012.
This time it is not the 75 % income tax which France’s present socialist government wishes to place on personal incomes of over €1 million a year. His concern is the way in which shares, bonus shares, and stock options are taxed at rates of about 80 % of the value of the shares.
Mr Charles, according to an interview in Le Monde, the Paris newspaper, on March 11, said that last year he sold 28 million shares in Dassault Systemes in order to pay for new shares that were awarded him – and he said he had to sell more shares than he acquired.
In the rarified world of 3D software design it is standard practice for Dassault Systeme’s rivals the world over to reward managers with equity participation, but the taxation makes this so unattractive in France that Mr Charles himself is considering switching to another country of residence and, he says, some of his managers in France have already left and others are planning to.
“We work in a globalised sector where there are no physical barriers because our activities are immaterial. The management team includes persons from more than a hundred companies who all work in the same way wherever they are, and many of these countries they encourage “the dream” (of allowing managers to get rich themselves in step with the company)…..How can we keep in France those who are engaged in permanantly reinventing Dassault Systemes if they cannot participate in this process ?“
“If this burden of taxation is confirmed, a company like Dassault Systemes could not be created in France, or create employment or reach a global size, I am afraid. It is the entire digital sector that is in danger,” he said.
