Feb. 12 (Bloomberg) -- On the menu for the lunch French President Francois Hollande is hosting today for the chiefs of the likes of Google Inc. and Facebook Inc.: carrots and sticks.
In the first official trip by a French president to San Francisco in 30 years, Hollande will seek to woo Facebook’s Sheryl Sandberg, Google’s Eric Schmidt and Twitter Inc.’s Jack Dorsey into investing more in France. He will also carry a warning on taxes amid accusations of revenue diverted by Silicon Valley’s largest players from France to Europe’s low-tax nations.
“There are issues to take on, like tax optimization and privacy,” said Jean-David Chamboredon, the chairman of Paris-based ISAI Gestion SAS and the head of the entrepreneurs’ group, The Pigeons. “But there’s also enthusiasm, speed and value creation that one hopes will be contagious.”
Hollande’s balancing act during a seven-hour stop in the Bay area on the last day of his U.S. state visit comes as he confronts an economy at home that’s been at a near-standstill since 2012, an unemployment rate that’s at a 16-year high and a deficit still above the European threshold. With his popularity at a record low, Hollande is hard pressed to fill the state’s coffers and spur job creation by encouraging companies to invest.
Seeking a piece of the world of tweets, follows, likes and snapchats, Hollande wants to show California’s entrepreneurs that France is a “Start-up Republic,” according to a press kit emailed by his office.
Tax breaks for research and easy work permits for scientists will be on display to make up for French tax-evasion probes under way against companies such as Google and LinkedIn.
The 59-year-old Socialist President will also showcase his new business-friendly self. He started the year unveiling policies including a pledge to slash state spending and 30 billion euros ($41 billion) in cuts on charges paid by companies, measures that have yet to be put in place.
“No risk, no gain, and no victory, no success,” Hollande, who was at the helm of the Socialist Party for 12 years, told entrepreneurs last month. “Risk is movement.”
Hollande’s new-found enthusiasm for business -- after he once famously said he didn’t “like the rich,” and claimed during his election campaign that finance was his “greatest adversary” -- has drawn skepticism.
“The Pigeons,” the French entrepreneurs’ group, some of whose members now live in the Bay area, are wary of his promises.
“The president will probably learn what it takes to create a favorable environment to allow global leaders to emerge: speed, capital, trust, all that’s made Silicon Valley so successful,” Chamboredon said on Bloomberg Television.
Hollande’s lunch at a French restaurant in San Francisco will also include 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.
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 are often difficult to pin down.
“We must take action against these big corporations -- that we all know -- that are settling in low-corporate-tax countries,” he said on Feb. 6 as he toured a French Internet company near Paris.
The French government has declined to name the companies it’s investigating for dodging taxes and the size of the fines they may face.
Sunday newspaper Journal du Dimanche reported a fine of about 500 million euros for Google. Agence France-Presse said Facebook and LinkedIn Corp. also face tax fines. France’s Budget Ministry, in charge of the investigations, didn’t respond to calls for comments.
Hollande says many multinational companies avoid paying hundreds of millions of euros in value-added and corporate taxes using loopholes in European Union laws and different tax regimes across the region.
Some members of his government say France needs to tackle the issue at a European level instead of going after the companies.
“It’s all about European regulation,” French Foreign Minister Laurent Fabius told RTL radio on Feb. 10. “We must clean up our act at a European level.”
The Organization for Economic Cooperation and Development is expected to deliver the first set of guidelines of its plan to combat base erosion and profit shifting by September for the Group of 20 meeting.
While President Barack Obama may be Hollande’s ally in confronting giant Internet companies shifting profits to avoid corporate taxes, his administration wants to prevent U.S. companies from being singled out by European regulators.
Many of these companies 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.
Google -- 500 of whose 36,000 employees worldwide are in Paris -- maintains its European headquarters in Ireland. From there, it sells advertising across the region, including in France. Apple, which has its European headquarters in Cork, Ireland, sells most of the applications through its online App Store. Facebook has its European base in Dublin.
For Hollande, who hosted Google Chairman Schmidt for an October 2012 sit-down about taxes, jobs and investments, the Silicon Valley lunch will be yet another opportunity to find a way to press home his point while showing he understands what makes the entrepreneurial spirit in the valley work.
The last time a French president visited the Bay area, the disconnect between France and the valley was all but apparent.
In 1984, when Socialist President Francois Mitterrand visited California, all his “Cuba-admiring wife,” Danielle, touring Apple’s factory with founder Steve Jobs, could talk about was overtime pay and vacation for workers, missing the technological revolution around her, according to Walter Isaacson’s 2011 biography of Jobs.
“France needs to kick into the 21st century quickly and Francois Hollande will get confirmation of that during his trip to Silicon Valley,” said Chamboredon.
To contact the editor responsible for this story: Vidya Root at email@example.com