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French ‘Pigeons’ in Flutter Over Tax Rise

Hugh Carnegy, Financial Times
Wednesday, 3 Oct 2012 | 2:04 AM ET

François Hollandes Socialist government is facing a new tax revolt this time not from big business protesting against the presidents 75 percent income tax band but in the form of a viral online campaign by small French entrepreneurs furious about a jump in capital gains taxes.

A person fills out a tax declaration for the 2012 income tax on September 10, 2012 in Lille, northern France.
A person fills out a tax declaration for the 2012 income tax on September 10, 2012 in Lille, northern France.

Calling themselves the Pigeons French slang loosely translated as the fall guys a group of Internet entrepreneurs took to social networking sites to voice their opposition to the measure within hours of its announcement in last Fridays 2013 budget .

The cause of their ire is the governments plan to tax capital gains at the same rates as earned income. Jean-David Chamboredon, chief executive of ISAI, a venture capital fund, and leader of an investors lobby group called France Digitale, said the result in some cases would be a jump in the effective marginal tax rate to as high as 60 percent from 32 percent for investors and entrepreneurs selling out of a business.

This is very dangerous because investors may not invest in new companies any more, he said.

In an online statement of their objections, Les Pigeons said the measure amounted to the breaking of dreams, an almost sadistic demotivation.

Stoking the ill feeling were remarks made by Pierre Moscovici, the finance minister, on Friday when he referred to those who earn while sleeping, adding: It is not right that capital income is taxed at a lower rate than income from work.

By Tuesday the entrepreneurs new Facebook page had attracted more than 23,000 likes with the Twitter handle #defensepigeons also bombarded with messages of support. French mainstream media latched on to the protest.

Jeremy Benmoussa, who owns two small web-based social communications businesses and one of four people who set up the Facebook page, said entrepreneurs like him felt they were being mugged by the new tax proposal: We are being treated as pigeons, he told the Financial Times.

We are different from the grands patrons on their big salaries. We work 24 hours a day and we need help. We need investors. If this new tax goes ahead it will be very difficult for new businesses to find investors.

The campaign has had its online detractors, with some commentators accusing the entrepreneurs of exaggerating their plight ad saying that only in very few cases would the tax rate hit 60 percent.

The government included a number of measures in the budget to aid small businesses, which it has pledged to shelter from the tough fiscal effort required to meet Frances budget deficit target.

The 10 billion in new taxes imposed on business was mainly aimed at big companies. The government believes Les Pigeons are being stoked by the opposition center-right UMP party something the protesters deny.

Fleur Pellerin, minister for digital industry and small businesses, said the budget contained measures to neutralize the effect of the higher marginal capital gains tax rates on small businesses and start-ups and included enhanced tax exemptions for young innovative enterprises.

We are working on measures that encourage investment in productive capital, as opposed to sleeping capital, she told the FT.

Mr. Benmoussa said the situation for new businesses had improved over the past decade, creating a start-up culture in France. The budget did have lots of good things for small businesses. But this [capital gains] measure is creating a situation that is catastrophic, he said.

Mr. Chamboredon, ISAIs chief executive, said there was a risk that venture capitalists, business angels and other investors would shift their attention to countries with lower tax regimes, such as the U.K. and Belgium.

But he added that there was some good news in the online campaign: It shows that there are plenty of young people in France who want to be entrepreneurs. Thats good!

Les Pigeons said their cyberspace protest would continue: We believe in the power of social media...and are convinced that this mobilization will make the government understand that it has chosen the wrong battle in attacking entrepreneurs.

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