The government does not seem to understand that France’s growth deficit is due to the lack of high potential new technology companies.
The French government is lowering the status of young innovative companies (YIC) in the Finance Bill. Jacques Chirac, established Tax breaks for YIC in 2004. Since then, over 2,000 innovative companies, have benefited by the JEI tax advantage. These are necessarily technology start-ups more than eight years old. With this status, which removes certain employers’ social charges on researchers’ salaries, technology SMEs employ more reseazrchers, do more research, attract more private capital and compete with their competitors around the world.
YIC status is crucial for companies such as Carmat which was established in 2008. It developed the artificial heart which is the most innovative in the world. Deinove which was founded in 2006, developed breakthrough processes for biofuels. Aldebaran Robotics was established in 2005 and develops intelligent robots. Today, there are the thousands of SMEs developing medicines, vaccines, software, new methods of energy, drones, clean engine, etc. Very strict rules, which preclude obtaining the JEI status, are efficiently targeted to reduced Government costs (105 million euros per year). In contrast, note that the research tax credit which mainly benefiting large companies, costs the government € 5 billion per year. Several European countries have copied the JEI tax reductions.
This Finance Bill promotes fiscal stability for large companies. However, the Bill undermines the confidence of venture capital investors, entrepreneurs and researchers to start SMEs. With the reduction of the benefits of the JEI, young SMEs will undoubtedly suffer. Their payroll costs will be 20% more expensive so they will be forced to reduce employment and growth potential. In addition to measuring anti-JEI “cap to 1.5 million per SME from the reduction of ISF, the government seems not to understand that France’s growth and our deficit deindustrialization are a direct result of lack of new technology companies. Some of these companies within twenty years may become world leaders like Google, Cisco, and Amgen. 22% of large U.S. companies started as SMEs. 25% of technology companies in the U.S. are SMEs, 7% in Europe and only 1% in France.
Why are these JEI tax reductions critical? They are indispensable partners of the private university. They allow the rapid transfer of scientific research into technological products with high economic value. SMEs take the risks of visionary breakthrough innovations. In contrast, a large company would kill these projects because of lack of consensus. However, these very projects create tens of thousands of skilled jobs for global industrial giants. The life sciences and new energy and information technology are among today’s young innovative companies in California and China. France could also be a part of this trend. However, this finance bill limits JEI so that only 1% of mid-sized companies will get the opportunity to grow. In fact, paying our debt and reducing our deficit depends on our number of new businesses which are internationally competitive.
These small SMEs with high growth potential need the vitamins provided by targeted tax incentives (JEI, CIR, IR reduction and ISF) and by OSEO aids. These reduce the risk borne by entrepreneurs and investors and increase their financial resources and therefore their ambition and their growth rate. Kill the YIC status, and it will reduce our economic growth and our future independence in tomorrow’s major industrial and technological sectors.