Is France about to hinder its entrepreneurs?

PARIS -- When Kate Boudot set up her English school near Cherbourg in 2009, the French government's new auto-entrepreneur fiscal status suited her needs perfectly. The status allowed her to start her own business with the possibility of earning up to 32,600 euros, nearly double the annual minimum wage in France. A mother of three, a cancer survivor, and an expat from Manchester, Boudot was in no position to afford launching a full-fledged business, but the auto-entrepreneur status allowed her to work legally from home and pay reasonable taxes without risk.

Four years later, Boudot is angry. Very angry. And she is not alone.

Earlier this year, Sylvia Pinel, the French minister of artisans and commerce, declared her intention to alter the status, sending Boudot and fellow entrepreneurs to arms. The changes proposed for later this year include lowering the earnings ceiling for auto-entrepreneurs down to 19,000 euros for service industries as well as capping the previously unlimited time that one can maintain the status to two years if it's one's main source of income exceeds the ceiling. Those who go beyond these limits will be required to register their company as a business and pay taxes at a higher rate.

With over 900,000 people registered under the status, resistance to change has been strong, led by a group called the Poussins, or baby chicks, a symbolic nod to the young and fragile nature of auto-entrepreneurs. The movement, composed of small-scale single-employee businesses, has attracted over 16,000 Facebook likes and more than 98,000 signatures on its online petition to prevent the government from changing the status. The Poussins have been so vocal that Pinel sat down with representatives early in June to discuss the proposed changes and concerns that are still being debated.

The battle is a classic one. To the Poussins, the government and business lobbies are trying to squash independent workers whom they regard as unfair competition. New regulations could stifle much of the creativity and innovation that France has been pushing for through various business incubators and start-up initiatives over the years.

To the government, the limits are a way to grow entrepreneurial efforts and to avoid potential abuse of the status. "The government's objective is to make the status a first step towards a business," Pinel wrote in her latest release, noting that only five percent of auto-entrepreneurs make the switch to an official company. She also defended the changes as a way to protect workers. Some employers, for example, hire freelancers for jobs under the auto-entrepreneur status as a way to avoid paying hefty social charges for salaried workers, though reports of such issues are rare.

For Boudot and others like her, the status has been the perfect solution to staggering business charges while maintaining flexibility in her life. "It's a small status that we can chose without taking any risk, we can test our market, and if the idea doesn't work we can go back and try something else," she said. While auto-entrepreneurs cannot declare business expenses or hire anyone, they are entirely autonomous and pay favorable tax rates (depending on the type of work) easily online -- no accountant needed.

Especially for expats living in France, the status has been the ideal and sometimes only way to make money legally. Many under the status work several jobs and take small contracts to either make a living or subsidize other income. It's a way to bring in extra cash without having to work au black, or under the table, which consequently prevents access to social benefits like medical care. Granted, the entrepreneur pays his or her own fees, but at a lower rate than what one would pay if he or she ran a proper company (called a S.A.R.L. in French). Growing into a full enterprise, however, is not always the goal of these independent workers.

Certain lobbies, like the construction companies, say that freelance contractors have undercut them, effectively stealing their work. Still, the 67,000 auto-entrepreneurs in construction account for 47.5 million euros, just 0.7 percent of all construction income from companies with fewer than 20 workers. The unfair competition case is not an airtight one as of yet, but artisan businesses are pushing the claim that auto-entrepreneurs are undercutting them. Alain Griset, president of the chamber of trades and artisans, went so far as to propose giving tradesmen and artisans the same procedures to follow as the auto-entrepreneur, meaning lower tax rates and easier procedures for declaring revenue.

While both sides have their arguments, Boudot said that painting all auto-entrepreneurs with one brush is the main problem. "To penalize people for creating a small business and to force them to create a full-fledged business is unfair," she said. "Webmasters, interpreters, translations, people who design wedding albums, it's all small businesses," she said, "and we are happy, but we can't afford to become bigger. We've chosen this for a reason."

Boudot took her frustration and anger online. After interacting with other Poussins on their Facebook page, she launched a private group as a forum to continue the conversation, attracting 160 members in just four days. The lively discussion of freelancers has created a community that previously had little interaction, something that Boudot said is a positive outcome regardless of what the government implements in the end.

Photo: Flickr/CSKK

This post was originally published on Smartplanet.com