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TheStreet Open House

Bowing In 'pigeon' Fight, France Slashes Taxes

By ELAINE GANLEY and SYLVIE CORBET

PARIS (AP) â¿¿ President Francois Hollande announced on Monday a series of measures to encourage the French entrepreneurial spirit, including drastic cuts in capital gains taxes â¿¿ up to 65 percent â¿¿ for the sale of small companies and a plan to make France start-up friendly.

Hollande, looking to stimulate flagging growth and cut into the nation's 10.6 percent jobless rate, also ordered the Interior Ministry to introduce visas for foreign entrepreneurs, and to speed up the process to make the country more attractive to foreign professionals.

"Half of the entrepreneurs of Silicon Valley are immigrants," Hollande said in a speech before some 300 entrepreneurs at the Elysee Palace. "We must waste no talent."

The Socialist president has been viewed by some as an anti-business leader, and infuriated entrepreneurs last year by proposing increased taxes on investments. In response, entrepreneurs, calling themselves "pigeons" â¿¿ French slang for someone who has been duped â¿¿ launched an online opposition campaign that quickly got tens of thousands of "likes" on Facebook, and trended on Twitter.

Hollande, trying to return to the good graces of entrepreneurs, said he was undoing that plan, and simplifying the system.

"There are no less than 40 formulas for dealing with capital gains ... 40 different ones. And now there will be but one," Hollande said.

He enumerated a graded scale for tax breaks on capital gains for entrepreneurs who bought start-ups: 65 percent if the company has been held at least eight years and 50 percent after two years. The tax advantage rises to 85 percent when companies are less than 10 years old, are being passed on to family members or the owner is retiring.

Experts say Hollande's initial plan would have meant an effective tax rate of 60 percent, compared with 15 percent on U.S. capital gains.

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