French tax on startups • Hacker News Board

Re: French tax on startups

#21

Post by caretu » Sat, Oct 20, 2012, 3:03 PM UTC

shasta wrote: post #17

caretu wrote: post #16

Earlier quoted context omitted.

The Nordic countries do have a lot of taxes, and Norway most of all. And that means Norway is not the easiest country to do business in, unless you're into oil, gas or fish. The one big killer in Norway, is taxation of working capital. Which is why a Norwegian Facebook or Twitter would be impossible at this moment. If you have a company valued at say $100 million, but you're losing money at a rate of $200k per year,…

Rather than trying to tax companies based on some valuation, why doesn't the government just collect a small percentage of stock each year?

I might have been a bit unclear, but the tax I mentioned applies to the owners of the company, not the company itself. Which means that it's very hard for entrepreneurs to maintain control of their company, since they have to sell stock just to pay the taxes on their stock.

A report from The Confederation of Norwegian Enterprise (NHO) published this spring, showed that over 20.000 Norwegian business owners paid more in taxes, based on the company's valuation, than the entire revenue of said company.

Re: French tax on startups

#22

Post by xyzzyz » Sat, Oct 20, 2012, 3:06 PM UTC

yummyfajitas wrote: post #13

davidw wrote: post #10

Earlier quoted context omitted.

Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opini…

Don't the Nordic countries have a lot of taxes? Not on corporations. They do tend to have rather high taxes on middle class individuals, however. http://blogs-images.forbes.com/kenrapoza/files/2011/09/Corpo... http://www.forbes.com/sites/kenrapoza/2011/09/09/a-cross-cou...

Ah, I live in one of these countries with low corporate income tax (it's 19% here), and yet right wing here wants to make it even lower to increase entrepreneurship, and everybody complains how hard it is to do business here, because taxes and insurance contribute additional ~13-15% cost to base salary, so that they have to use law loopholes to escape that (which is very widespread, and recent attempts by government to fixed it resulted in an public outcry).

Hearing all that, one could imagine that in countries like France, with >30% corporate tax and high employment cost, no business can take place at all, and it must have fallen in a deep economic depression a long time ago.

Re: French tax on startups

#23

Post by subsystem » Sat, Oct 20, 2012, 3:07 PM UTC

caretu wrote: post #16

davidw wrote: post #10

Earlier quoted context omitted.

Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opini…

The Nordic countries do have a lot of taxes, and Norway most of all. And that means Norway is not the easiest country to do business in, unless you're into oil, gas or fish. The one big killer in Norway, is taxation of working capital. Which is why a Norwegian Facebook or Twitter would be impossible at this moment. If you have a company valued at say $100 million, but you're losing money at a rate of $200k per year,…

"And that means Norway is not the easiest country to do business in [...]"

Well, the ease of doing business index says otherwise.

http://en.wikipedia.org/wiki/Ease_of_doing_business_index

Re: French tax on startups

#24

Post by twoodfin » Sat, Oct 20, 2012, 3:09 PM UTC

yummyfajitas wrote: post #13

davidw wrote: post #10

Earlier quoted context omitted.

Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opini…

Don't the Nordic countries have a lot of taxes? Not on corporations. They do tend to have rather high taxes on middle class individuals, however. http://blogs-images.forbes.com/kenrapoza/files/2011/09/Corpo... http://www.forbes.com/sites/kenrapoza/2011/09/09/a-cross-cou...

And in return provide extensive middle class services.

Nobody who wants to get elected in the U.S. can say this, but the middle class here increasingly sees more benefits from government while paying less and less for them. The poor are screwed by regressive sales and payroll taxes, while the upper classes face much higher average rates due to income cutoffs on a variety of tax credits and deductions.

You can argue about payroll vs. state vs. income taxes, but it's indisputable that the income tax which funds government programs has become dramatically more progressive in real terms over the last few decades.

Will ACA help the upper class? Not really: they had a low uninsured rate to begin with. Will it help the poor? Not really: They already had Medicaid/CHIP. It's effectively a middle class benefit, and it's paid for largely by increased taxes on the rich.

There's nothing intrinsically wrong with taxing the upper class to help the middle class. Maybe it will solve the "problem" of inequality, but I'm not so sure. I think I'd prefer a system where a more generous government requires a more generous citizenry.

Re: French tax on startups

#25

Post by dllthomas » Sat, Oct 20, 2012, 3:16 PM UTC

yummyfajitas wrote: post #11

snippyhollow wrote: post #3

I'm tired of this BS being spread by ppl who didn't even read the finances law in question (at least bullet points). It's not true, the 60% tax rate comes from the creation of a new bracket in the income tax and the treatment of selling your startup as income. To attain 60% you 1) need to sell for more than 150k 2) count all the acquisition money as instant revenue 3) do not intend to invest. And in fact, you have de…

VCs make nearly all their returns off a few big hits. So on the big hit, they will certainly: 1) make > 150k. 2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns. 3) Return the funds to investors. Sounds like this law will, in fa…

Institutional VCs will likely be able to account for the income such that they are, at least on paper, re-investing a good portion of the income.

Re: French tax on startups

#26

Post by yummyfajitas » Sat, Oct 20, 2012, 3:26 PM UTC

xyzzyz wrote: post #22

yummyfajitas wrote: post #13

Earlier quoted context omitted.

Don't the Nordic countries have a lot of taxes? Not on corporations. They do tend to have rather high taxes on middle class individuals, however. http://blogs-images.forbes.com/kenrapoza/files/2011/09/Corpo... http://www.forbes.com/sites/kenrapoza/2011/09/09/a-cross-cou...

Ah, I live in one of these countries with low corporate income tax (it's 19% here), and yet right wing here wants to make it even lower to increase entrepreneurship, and everybody complains how hard it is to do business here, because taxes and insurance contribute additional ~13-15% cost to base salary, so that they have to use law loopholes to escape that (which is very widespread, and recent attempts by government…

Hearing all that, one could imagine that in countries like France, with >30% corporate tax and high employment cost, no business can take place at all, and it must have fallen in a deep economic depression a long time ago.

That is generally the case. Unemployment rates in the 8-12 neighborhood are considered a disaster in the US. In France they are normal.

France is as poor as Arkansas and Idaho, two of the poorest US states. If the US in general fell to this level, we'd definitely be calling it a deep depression.

http://mjperry.blogspot.com/2010/01/paul-krugman-extols-euro...

The only reason France isn't described as being in a recession is because it's always been this way, so they are used to it.

Re: French tax on startups

#27

Post by yummyfajitas » Sat, Oct 20, 2012, 3:28 PM UTC

dllthomas wrote: post #25

yummyfajitas wrote: post #11

Earlier quoted context omitted.

VCs make nearly all their returns off a few big hits. So on the big hit, they will certainly: 1) make > 150k. 2) Sell out instantly, or at the very least in chunks considerably bigger than 150k. Even if they do sell out in 150k chunks, that will drastically reduce their returns - returns = log(outcome/investment)/t, so increasing t will lower returns. 3) Return the funds to investors. Sounds like this law will, in fa…

Institutional VCs will likely be able to account for the income such that they are, at least on paper, re-investing a good portion of the income.

No. A VC fund invests each dollar precisely once and then attempts (over the next 10-15 years) to return those funds to investors when they cash out.

Maybe VCs in France will completely restructure their business to avoid this massive tax (presumably incurring lower returns in the process). Or maybe they will just invest outside France. Either way, this is not a small problem for them.

Re: French tax on startups

#28

Post by cdavid » Sat, Oct 20, 2012, 3:47 PM UTC

yummyfajitas wrote: post #13

davidw wrote: post #10

Earlier quoted context omitted.

Don't the Nordic countries have a lot of taxes? They seem to do ok in the startup scene. My wild guess - I don't know how things are 'on the ground' in either France or the Nordic countries - is that France tends to have more bureaucracy like here in Italy. So that it's not just a matter of "make some money, pay X in taxes" which is pretty easy to reason about, and somewhat "fair" (even if we all have different opini…

Don't the Nordic countries have a lot of taxes? Not on corporations. They do tend to have rather high taxes on middle class individuals, however. http://blogs-images.forbes.com/kenrapoza/files/2011/09/Corpo... http://www.forbes.com/sites/kenrapoza/2011/09/09/a-cross-cou...

For corporate taxes, effective tax rate is the relevant number. I could not find recent figures, but most rich countries had an effective tax rate in the 10-20 % rate, with Germany and Australia as outliers (below and above) in 2005. The US (well, states) are known to have a high official corporate tax rate, but the effective tax rate is much lower. In general, corporate taxes have significantly decreased on various measures (http://marginalrevolution.com/marginalrevolution/2011/11/cor...).

This is actually the main issue of this new law in France: distortions and waste around tax avoidance much more than the actual tax rates, which are mostly for political show (the tax will not raise that much money, even though France has the highest number of people > 1 million euros in assets/etc... within Europe).

Re: French tax on startups

#29

Post by rayiner » Sat, Oct 20, 2012, 3:52 PM UTC

This seems to affect VC's and people here are acting like you can't have startups without VC's. There are these things called banks...

Re: French tax on startups

#30

Post by adrr » Sat, Oct 20, 2012, 3:54 PM UTC

btb wrote: post #14

flyinglizard wrote: post #9

France is doing us foreigners a big favor by taking on an experience in wealth redistribution through extreme taxation. It takes some balls to do something that may destroy your economy to this extent. We should all thank the French voters who took on the risk to put this government in control. (I think it'll end in tears, but it will serve to deter the voters in other countries the next time they think of starting a…

Yeah the new 75% income tax bracket in France really is putting the Laffer curve theory to the test. Will be very interesting to see how it pans out. I'm sure socialist governments elsewhere in Europe is following this grand experiment closely.

US had a 92% tax rate for a few years and 70%+ during our great economic expansion after WWII, which was highest GDP grow in our history.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...