France clips wings of 'chick' entrepreneurs

PARIS Wed Jun 12, 2013 9:37am EDT

French Minister for Industrial Recovery Arnaud Montebourg waves goodbye after attending a ministers' meeting at the Elysee Palace in Paris May 6, 2013. REUTERS/Gonzalo Fuentes

French Minister for Industrial Recovery Arnaud Montebourg waves goodbye after attending a ministers' meeting at the Elysee Palace in Paris May 6, 2013.

Credit: Reuters/Gonzalo Fuentes

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PARIS (Reuters) - France trimmed tax breaks and other advantages for small entrepreneurs on Wednesday, saying the benefits introduced under former President Nicolas Sarkozy had failed to help business start-ups and were open to abuse.

But Francois Hollande's Socialist government said it would not scrap the so-called "auto-entrepreneur" status altogether, conceding that it had helped thousands into part-time work that boosted their spending power and kept them off jobless queues, now at 14-year record highs.

The decision came despite an eye-catching online campaign by auto-entrepreneurs calling themselves "The Chicks", inspired by another group called "The Pigeons" that forced the government last year to exempt entrepreneurs from capital gains tax rises.

"The government wanted to come up with a reform that was fair and balanced, reconciling the needs of all," Minister for Trades and Tourism Sylvia Pinel told a news conference.

Building firms complain that auto-entrepreneurs use their special status to undercut them on cost. Separately, trade unions say companies are turning to these self-employed rather than hiring workers on more expensive regular contracts.

Under the auto-entrepreneur scheme - which people can join and quit online with a few clicks - labor charges are paid only as earnings come in, rather than upfront as companies must do.

Pinel said the income ceilings above which entrepreneurs must leave the scheme would be lowered from 32,600 euros ($43,300)to 19,000 euros a year for those in the services sector, and from 81,500 to 47,500 euros for those supplying merchandise.

Auto-entrepreneurs whose income exceeds those limits for two years in a row will have a transition period in which they must convert to regular company status.

"The original rules were clear and are becoming more complicated now," said Gregoire Leclercq, head of the French Auto-Entrepreneurs Federation.

"This will dampen the entrepreneurial spirit, it will hold back the growth in the number of start-ups," he told Reuters.

Around 900,000 French took up the auto-entrepreneur status. From plumbers to hairdressers and teachers, most barely scrape a living - nine out of ten earn less than the gross monthly minimum wage of 1,430 euros.

Most people join the scheme to earn a secondary income in their household or escape from unemployment. The advantage for the government is that they are off welfare benefits and their income is declared and taxed, albeit at a concessionary rate.

(Writing by Mark John; Editing by Paul Taylor)

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