France looks into offering tax incentives to high-tech companies
Following the move of one of France's most promising biotechnology companies to the US, the French government has announced that it will consider new tax breaks for high-technology companies. According to the Financial Times, Thierry Breton, the French Finance Minister, is studying a tax incentives plan put forward by the pro-research lobby group Conseil Stratégique de l'Innovation (CSI) to encourage more innovative companies to go public, and to make investment in such companies more attractive to investors. This follows the recent announcement by IDM, a French biopharmaceutical company specialising in immunotherapy for cancer treatment, of its merger with a smaller US company that has just gained a Nasdaq stock market listing. IDM will move its headquarters to San Diego. IDM has explained that the decision was influenced by the difficulties in raising funds facing small companies in France. In June 2004, IDM, a world leader in the field of cell therapy, and closely linked to the pharmaceutical giant Sanofi-Aventis, was forced to abandon a flotation on the Paris bourse. The company was trying to raise 100 million euro. Although the 100 IDM employees currently in Paris will not loose their jobs, decisions will now be made in the US. This announcement follows the move of the headquarters of two other French start-ups to London and Zurich. In reaction to this, the CSI suggests offering tax breaks on research spending to companies with fewer than 2,000 employees and with revenues of less than 150 million euro. The breaks would last for eight years after a company's initial public offering. Shareholders would be exempt from taxes on capital gains, wealth and inheritance. The plan is the latest in a series of government measures intended to reduce the development gap between French start-ups and their equivalents in the US and UK. In December 2004, the French government launched the Young Innovative Companies (YIC) concept. The plan, to be presented next month by French Prime Minister Jean-Pierre Raffarin could, if approved, be introduced before the end of 2005. Philippe Pouletty, head of the CSI and the France Biotech industry association, says the difficulties faced by start-ups to raise funds boils down to French insurers' excessive aversion to risk. 'French life insurers have about 1,000 billion euro in savings, making them our equivalent of Anglo-Saxon pension funds, but they do not invest enough in small companies,' explains Mr Pouletty. Mr Pouletty called on French decision-makers to react with urgency. 'Without a major and immediate effort [to open] up stock markets to small companies in France and Europe, we are going to see more and more IDM's going west.'
Countries
France, United States