Hollande Woos Investment, Tax Revenue From California Companies

In the first official trip by a French president to California in 30 years, Francois Hollande sought to convince San Francisco-area companies that he’s making France a better country to invest and pay taxes in.

During an eight-hour swing through San Francisco on the third day of his U.S. state visit, Hollande hosted a lunch for executives from the likes of Google Inc. (GOOG) and Facebook Inc., opened an accelerator for French start-ups, and spoke to French expatriates, many of whom work in Silicon Valley.

“We want these Internet giants, many of which didn’t even exist 20 years ago, to come to France and invest, we aren’t afraid of them,” Hollande told 2,800 French expats in San Francisco. “But there are certain rules that must be respected, including tax ones.”

Hollande’s visit, after two days in Washington where he toured Thomas Jefferson’s Monticello estate and met with President Barack Obama at the White House where he was hosted at a state dinner, is aimed at underscoring new business friendly policies he’s unveiled this year. The 59-year-old president has pledged to cut state spending by 50 billion euros ($68 billion) and reduce payroll taxes by 30 billion euros, measures not yet implemented. He’s commissioned a group of experts to identify and eliminate bureaucratic obstacles.

Seeking Freedom

“For innovation and research, France is a leader,” Hollande said earlier in a converted warehouse in San Francisco’s Dogpatch neighborhood, where he opened a “French Tech Hub” to help startups expand in the Bay Area. “We are maybe not the best in other areas, such as taxes and bureaucratic complications. Entrepreneurs don’t want help, they want freedom.”

He hugged one French businessman, who said at the opening that Obama openly embraced U.S. entrepreneurs.

Hollande’s enthusiasm for business contrasts with comments he made as a candidate. He once said he didn’t “like the rich,” claiming that finance was his “greatest adversary,” and he introduced a 75 percent tax rate on incomes over 1 million euros.

“It’s already a step that he’s come here,” said Bertrand Diard, founder of Talend, a company with offices near Paris and in Los Altos, California that writes software to handle large quantities of data, or so-called Big Data. “His proposals go in the right direction. Let’s just hope they go into effect.”

Popularity Slumping

Hollande approval ratings are the lowest for any French president since polling began, hurt by an economy that’s barely grown since 2012, an unemployment rate at a 16-year high, and a budget deficit above Europe’s self-imposed limits.

At the French Tech Hub, he announced measures to promote Internet companies in France, including easier terms for crowd-funding and stock options, introducing computer science in middle school, loosening French visa requirements for as many as 10,000 engineers a year, and making it possible to do all official procedures in France on-line.

To make the point that he values the New Economy, Hollande took with him to the U.S. the founders of French technology companies such as Withings, which makes connective devices; Internet marketing company 1000Mercis; and Carmat, a maker of artificial hearts.

“It’s a major symbol that he took us on his plane, and not just the usual big companies,” said Frederic Mazzella, founder of Paris-based BlaBlaCar, a car sharing site with 6 million members across Europe. “I think he really does understand that France needs a better ecosystem for startups.”

Crab, Duck

At the lunch at La Folie, a French restaurant, Hollande sought to woo 11 executives, including Facebook’s Sheryl Sandberg, Google’s Eric Schmidt and Twitter Inc. (TWTR)’s Jack Dorsey. He also carried a warning on taxes amid accusations of revenue diverted by Silicon Valley’s largest players from France to Europe’s low-tax nations.

The lunch, which was closed to the press, also included Tony Fadell, the founder of Nest Labs Inc. and a former Apple Inc. senior vice president, and Marc Benioff, chief executive officer of San Francisco-based Salesforce.com.

None of the executives spoke to reporters before or after the lunch, which featured local crab and duck, and French wines -- at the insistence of Hollande’s office, according to Roland Passot, the chef and owner.

Since his May 2012 election, Hollande has sought to block large multinationals from doing what he calls “tax optimization.” He has targeted Internet companies, whose operations can be difficult to pin down.

“We can’t have different rules and different taxes across Europe or it leads to optimization, where companies shop for the best rates,” Hollande said. “We have to work at the European level.”

Tax Operations

The French government has declined to name the companies it’s investigating for dodging taxes.

Sunday newspaper Journal du Dimanche reported Google would be fined about 500 million euros. Agence France-Presse said Facebook (FB) and LinkedIn Corp. (LNKD) also face tax fines. France’s Budget Ministry didn’t respond to calls for comments.

Many U.S. companies, including Google and Apple, have registered their European operations in Ireland, whose corporate tax of 12.5 percent is less than half France’s 33.3 percent, one of Europe’s steepest.

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net; Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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