Move over, Ireland.
Companies from Microsoft Corp to China’s Huawei Technologies Co (華為) scouring Europe for fiscally attractive shores are turning to France.
As a base for research-and-development (R&D) teams, that is.
Tax breaks for R&D of 5.6 billion euros (US$7.02 billion) this year alone and world-class scientists are making France a honeypot for technology companies.
As the French parliament debates how to shrink the nation’s budget deficit this month, some legislators are demanding the reining in of the R&D credits, saying that some foreign companies are abusing them. French President Francois Hollande has pledged that it a budget line he will not touch.
“The research tax breaks are decisive; they make France economically more attractive,” said Olivier Piou, who heads Gemalto, an Amsterdam-based developer of security products for bank cards, mobile phones and passports. The fiscal breaks offset a significant part of Gemalto’s R&D budget, making it more compelling to keep 30 percent of its 2,000 researchers worldwide in France, Piou said.
EU CONTEXT
Ireland’s corporate tax of 12.5 percent, less than half France’s 33.3 percent, ensures that companies from Google Inc to Apple Inc keep their European headquarters in the Celtic nation. Still, for R&D, global companies are increasingly beefing up their teams in France, transforming the nation into a European technology hub, mirroring the UK’s dominance in the financial industry and Germany’s manufacturing prowess.
Hollande boasted about the “edge” that the measure gives France during his nationally televised interview on Nov. 6.
“Often we have our handicaps, but here we have an advantage,” he said.
The jobs being created and the technological ecosystem the tax breaks are spawning is just what Hollande needs as he struggles to rekindle growth and reverse record-high joblessness. The measure, introduced in the 1980s, was expanded by former French president Nicolas Sarkozy. It is among the few of his predecessor’s policies retained by Hollande.
More than 17,000 companies, ranging from biotechnology and energy to software and gaming, are cashing in on the tax advantages and subsidies for innovation this year in France, with an average break of about 323,500 euros. The R&D tax break is France’s second-biggest behind a payroll credit, a measure to spur competitiveness, according to the Ministry of Budget, Public Accounts and Civil Administration.
The move, meant to keep the brightest minds and high-value jobs at home, is also prompting foreign companies to set-up laboratories or hire French algorithm whizzes.
INTERNATIONAL DRAW
Redmond, Washington-based Microsoft runs a joint unit with state-backed research institute Inria, where about 100 scientists work on fundamental research. The lab, created about eight years ago, expanded from software security to linking computers and sciences like health, alongside protecting growing loads of data.
Telecommunications network equipment maker Huawei plans to recruit 200 researchers by 2017 in the southern town of Sophia Antipolis.
Hiring by such companies is among the few bright spots in an otherwise grim picture in France with unemployment rising and an economy in its third year without tangible growth. Companies from automaker Peugeot SA to mobile-phone service provider Bouygues Telecom are firing staff as jobs go to low-cost countries or competition forces expenditure cuts.
HUAWEI
Against that backdrop, French Prime Minister Manuel Valls in September met with Huawei founder Ren Zhengfei (任正非) to go over the Chinese company’s plans to invest US$1.9 billion on R&D facilities in France over the next three years.
Ren told Valls that France’s strengths in mathematics and engineering and its fiscal advantages had persuaded him to bolster the company’s presence in France, according to a company spokeswoman in Paris.
“The fiscal context is not our first motivation, but of course it is an advantage France has over other countries,” said Isabelle Leung, a spokeswoman for Huawei in France. “In order of importance, we are here for the competency of the candidates, the ecosystem, as well as the research tax breaks.”
France had 276,400 science, mathematics and computing graduates, according to the latest data by Eurostat. That makes it Europe’s third-largest contributor behind Germany and the UK More than 10 percent of French graduates did science, mathematics and computing, putting France ahead of the EU average of 9 percent.
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