French to set up tax breaks to boost R&amp

December 20, 2002

The French government is counting on the private sector to boost spending on research and development, and next year it will introduce tax breaks to innovatory companies and their investors.

Industry minister Nicole Fontaine this month presented her "policy in favour of innovation", worked out in collaboration with research minister Claudie Haignere, which proposes a series of measures to encourage public-private cooperation in R&D. These include two statutes: one for "business angels", which will allow investors in innovation to set up capital risk companies with exemption from taxes on capital gains and dividends; and the other for companies less than eight years old and engaged in R&D, which will be exempt from profit taxes and other charges if they plough at least 15 per cent of their profit back into research.

The measures will encourage R&D links between the public and private sectors, including a revolutionary proposal from Ms Haignere to let public researchers in private partnerships receive extra "financial recognition".

The ministers hope the plan will help France meet President Chirac's European commitment to devote 3 per cent of gross domestic produceto research by 2010, compared with 2.2 per cent this year. The state research budget for 2003 showed a fall in real terms, despite ministry claims of a rise.

Ms Fontaine said France would have to increase R&Dby nearly 40 per cent in eight years to meet the president's commitment. "To progress, we must encourage companies, because they are today the ones that are behind in their R&D spending, compared with other comparable countries - between 25 per cent and 40 per cent lower than in Japan, the US and Germany," she said.

France could count only 4,000 business angels, compared with 50,000 in Britain and between 300,000 and 400,000 in the US, she said. She wants to increase the private sector's research contribution from the present 54 per cent to 66 per cent by 2010.

The measures are largely based on proposals of the Strategic Innovation Committee, a group composed of public research heads, company managers and politicians that was set up in the summer. Its members include Genevi ve Berger, director-general of the National Council for Scientific Research, and Christian Brechot, director-general of Inserm, France's health and medical research institute. Its chairman is entrepreneur Philippe Pouletty, president of France Biotech.

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