27 June 2011
A paper by academics Nadine Levratto and Evelyne Serverin, “Become Independent! The Paradoxical Constraints of France’s Autoentrepreneur Regime” (available here) shows the failure of this programme to generate entrepreneurial behaviours.
What went wrong, and why should other member states not copy France?
Since January 2009, when the autoentrepreneur category of working was first introduced, over 550,000 people have registered. They system differs from the also complex Regime Reel in France by taxing autoentrepeneurs on gross turnover (up to the allowed ceiling of €32100, at the rate of between 12 and 21.3%) rather than on revenue (turnover less expenses). People in this category discharge all their taxes by paying this amount, but do not get to claim expenses and do not need to do VAT accounting. In France, the very high national debt is driving lawmakers toward a regime that is levying the regressive social charges on everything from the first euro (!); this is evidence more of desperation than leadership — that entrepreneurs have been captured by this is not surprising.
Almost 50% of autoentrepreneurs in France had an annual turnover of zero, while 15% had a turnover of less than €1000. Only 500 autoentrepreneurs exceeded the upper threshold.
This regime fails because it is not about being entrepreneurial, but about collecting tax and creating bureaucratic barriers to success: more specifically:
- autoentreprenurs can’t hire anyone — the authors speak of them as ‘lonesome’, working out their entrepreneurial dream on their own, forbidden to collaborate with others, even hire an assistant
- they can’t recycle capital to build the business as it taxed away at the turnover level as there is no recognition of the extraordinary expenses of business startups
- because of the structure of business, they are a bad risk for banks to lend to
- two autoentpreneurs can’t collaborate as tax authorities would view them as a company
- there is an excessive concern for employment law and insufficient understanding that entrepreneurial behaviours are not about being secure, but about risk, and therefore has little to do with employment law itself.
There should be no surprise that the system failed and people outside France can say simply on this basis, and with some justification, that the French don’t have a word for ‘entrepreneur’ as clearly they don’t seem to understand what the word means. Indeed, the authors note that the programme has been such a dismal failure, that the French government is rebranding it as better for second incomes, than entrepreneurialism.
What we need is an analysis of these failing efforts at entrepreneurialism by member states, certainly as a warning to others, but more importantly to establish a general understanding of how entrepreneurialism should be treated within member states from the perspective of taxation and law.
If I were forum-shopping for a member state to pursue my entrepreneurial dreams, I would be looking for a country with light-touch taxation, and flexible employment rules. Start-ups have real problems with cash flow and locking them into high social charges and rigid employment laws is counterproductive.
What is worrying is that other member states, according the authors, have copied this regime: Portugal (recibos verdes) and Poland (samozatrudnierie). Others may be thinking about it. We should all be very afraid of this.
If you are entrepreneurial or have experience in specific member states, please email or comment. Which do you think is the best country in Europe to start a business or be entrepreneurial?