Does Sarkozy drink Iron Bru?

France is a great country, and like any country has many postives and many negatives. Having been a resident here for over 4 years, I find France a fascinating and ironic country full of paradoxes.

I celebrated the recent victory of Sarkozy as France needs change….

1. To cope with globalisation and changing world ecconmics. Much has been written on this topic.

2. Sort out internal issues to promote industry / entrepreneurship. Deal with some of the “nanny bureacracy” issues.

Since the election, there have been a few “rah rah” announcements around investing more into education and giving tax relief on mortgages to a). better educate people for work b). stimulate a housing “boom”.

Now I am not an economist, but these announcements are really skirting around the boosting industry, rather than deal with grass roots issues…

a) Education – Sarko should pay a visit to the City in London and he will see pretty quickly where the creme de la creme of France’s education system has ended up. The first/second language of the majority of derivatives trading desks is French. Why? because they are UK tax residents and so don’t have to pay an French income tax and social charges bill in excess of 52% (based on what they earn in the City). France’s education system is excellent (my kids are in it), the issue is that the tax system needs to change to motivate high earners back to France. The fact that the tax system is a joke anyway, as demonstrated by Mdme. Royal’s wealth tax return where she valued her Mougins villa at 400k Euro. No villa in Mougins has sold for 400k Euro since the 12th Centrury BC. Plus the cost of administrating the wealth tax is the same as the tax generated by it! Come on Sarko, attract the talent back to France with a reformed tax system – the education system is excellent!

2. Tax relief on mortages..Great to see the old UK MIRAS system copied. Shame the real issues are not being addressed to stimulate a property market – agent’s fees in the region of 4-6% and equivalent of UK stamp duty of 4-5% – so every transaction has at least 10% “fees and tax” added on. Address these issues and you will have a speculative housing market.

So what should Sarko do? Simple, support setting up and running businesses in France.

Let’s compare an entrepreneurial environment and the French environment…

UK

– To establish a company in the UK you need around 1 GBP share capital and 50 GBP to incorporate the business

– For smaller companies there is no need to have an accountant audit or prepare your accounts (hence saving fees). Using something like SAGE (100 or so GBP) is all you need.

– Your accountant can give you both tax and accounting advice

France

– To establish a company in France takes around 1,500 GBP in fees, having had a lawyer draw up articles, advertised in local press for the new company etc. etc.

– Tax advice can only be given by lawyers and not accountants. Therefore you need both an accountant and a tax lawer

– Only accountants are able to prepare accounts, costing the smaller company owner between 500-2000 Euros per year (doesn’t the French government trust business owners? or this an obsession with state sponsored bureacracy?)

– New company owners have to pay for and attend a “company running” course unless they can show prior experience. This does not protect against company failures as between 40%-60% of new French businesses fail within the first 3 years (lots fail due to miss-calculating the social charge bill)

– The amount of official paperwork and government agencies (e.g. social charges) you need to deal with is stunning ad most consume at least 5-10% of all France’s productivity

– If you establish the “wrong” type of legal corporate entity (and there are a vaste and confusing array to choose from) , it can cost around 2-4,000 EUR to change (believe me, a few colleagues have been caught out – French and ex-pat)

Can you spot the difference?

So is Sarko an Iron Bru or a Diet Cola drinker? I (and a vaste amount of others) really hope he “eats girders” and drinks the Bru!

Create an environment for stimulating smaller companies and “vive les entrepreneurs”!

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~ by Nigel on August 3, 2007.

2 Responses to “Does Sarkozy drink Iron Bru?”

  1. I remember he did pay a pre-election visit to the City… and there was a queue half way down lower thames street…

    http://www.guardian.co.uk/international/story/0,,2002300,00.html

    Guess it remains to be seen whether he’s as good as his word…

  2. Very true Stu.

    FYI Gordon Brown visited our Greshsam St. trading floor (your old one) a few months back. Gave a good speech, but was obviously wriiten by someone else as was a bit too city-rah-rah; so not believable that it was Mr. Brown’s true feelings 🙂

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