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French unemployment, lack of gazelles and Bercy laxity.

Monday 25 June 2012, by Bernard Zimmern

Firm-demography offers an explanation of French unemployment, based on 10 years of research and hundreds of studies with some 20 listed on this site. In France, we create 200,000 jobs a year less than we should, by not creating enough "gazelles". This is the failure of a tax administration, Bercy, that does not understand business creations and did not want to copy what works abroad.

French unemployment? Lack of "gazelles", laxity of Bercy.

The explanation of French unemployment is simple:

INSEE, our statistics government agency, has hidden from us that, for over a decade, we created 200,000 private jobs less per year than the Germans or the Englishmen.

We have accumulated a backlog of private employment of 5-7 million workers, which is the main cause for an intolerable burden imposed on companies that survive, for our hourly costs that are too high, for our budget deficit.

By halving the cash flow of our businesses, it takes us into a vicious cycle of job losses, as is happening in Greece.

Jobs are created mainly by a very small number of firms (between 3 and 6% of newly created firms) called "gazelles", developing around a product or service.

Their scarcity in France is such that we have, in equal populations, five times fewer jobs created by our gazelles than Americans and two to three times less than the Germans or the British. This comes from the fact our governing bodies encouraged, for 30 years, the development of small jobs, and the inefficient intervention of state agencies as Oséo Innovation, former ANVAR or CDC Entreprises. Our gazelles cannot be financed, like the Germans, by local independent banks we don’t have any more or, like the Anglo-Saxons, by independent Business Angels

We have a funding gap, of the magnitude of 2 to 4 billion € per year, by the independent BA. We need a tax measure like the EIS the British have successfully introduced, a tax law encouraging the 40,000 households than can afford to invest more than EUR 100,000 per year in gazelles, if the government takes half the risk. A gap all the more stupid than the tax revenues generated by additional gazelles are back in the coffers of the Treasury before being refunded to the investors.

To create massive gazelles and jobs, we need that investment in start-ups become the most advantageous proposal of our tax code and for that, like the Englishmen, we bring the income tax deduction “Avantage Madelin / Forissier “to 30% of the investment, with an annual investment limit of € 2 million for a household, not 40.000 and a relief of capital gains after three years. But to avoid tax evasion schemes and ensure that money goes into businesses really risky, Bercy must operate as the British Treasury and approve beneficiaries of the tax benefit by a rescript issued ... in less than a months.

Without a bold fiscal revolution, we will continue to incur high unemployment as we have done for 35 years.

Some red herrings:

• The belief that venture capital can fund the creation of gazelles

• The belief that state agencies (CDC Entreprise, Oséo or government body) may be substituted to Independent Business Angels: the government has neither the investment size nor the minimum efficiency required

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