- - Wednesday, October 17, 2012

PARIS — France’s Socialist government is proposing a slew of taxes — on art, on businesses, on the rich — that are drawing criticism for stifling entrepreneurship and scaring off the wealthy.

“Unfortunately, I think the politics we are leading in France will turn out to be catastrophic for the economy, which is already in bad shape,” said French economist Marc Touati, author of “When the Eurozone Explodes.” “This is a serious mistake, something you learn in [Economy 101] — it will aggravate the recession and therefore shrink the tax base.”

Led by President Francois Hollande, the French government proposed last month a series of tax measures in a bid to reduce the country’s budget deficit and help boost the economy.

The proposals included a tax increase of up to 60 percent on capital gains, up from 34.5 percent; a 75 percent tax on incomes of more than $1.29 million for two years; and a 45 percent tax rate for annual incomes exceeding $195,000.

The 2013 budget proposal already is having an effect on some entrepreneurs’ ability to raise capital — especially abroad, where many Europeans look to escape tight capital markets on the Continent.

Nicolas Voisin, 34, is chief executive officer and co-founder of Tactilize, an Internet startup that is developing a publishing network for iPad computers. He said a large New York investment fund had been very interested in his company.

“[Our contact at the fund] was very taken by Tactilize,” Mr. Voisin said. “He had said, ‘I think you are just what we are looking for.’”

But when co-founder Valentin Squirelo introduced himself last week to a senior executive there, he was asked, “Are you French? Is this a French startup?”

Mr. Squirelo nodded yes. The executive raised her hands and said, “No, we don’t go there.”

The rejection wasn’t Tactilize’s first since the tax measures were introduced.

“Our goal was to raise [$1.29 million] from U.S. investors from the media and technology industry,” said Mr. Voisin. “We had serious ongoing discussions with many. They all told us to come back in 2013.”

Leaving for greener pastures

Tactilize also is incorporated in the United States, which Mr. Voisin said was done to allow an American to keep the investment arrangement subject to U.S. law.

But with the way things are playing out in France, it may become a way for Tactilize to move across the Atlantic, he said.

“We want to stay in France. It’s not because of the higher taxes that we may leave,” Mr. Voisin said. “But we might be forced to leave to be in a position to raise the funds necessary to our growth.”

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