taxHow can Europe grow its tech sector? The digital economy already contributes up to 8% of GDP across the major G20 economies, and it’s estimated that up to 1.5 million new jobs could be created in Europe thanks to new internet technologies. With the EU still facing high unemployment rates and “moderate” (i.e. sluggish) growth, innovation supplied by a thriving tech sector could provide exactly the shot in the arm that Europe’s economy needs.

When we asked you, our readers, what’s stopping you from starting your own business, one of the most common responses we got was: “taxes”. The EU is often perceived as not being a particularly friendly environment for entrepreneurs, with high tax rates and too much red tape. However, the truth is that the corporate tax rate in Europe can vary a great deal from country to country.

In Ireland, for example, start-ups are granted a 100% tax exemption for the first three years. Likewise, in Italy, Belgium, and Spain, innovative start-ups benefit from lower tax rates. Corporate tax rates can vary from 35% in Malta, to 10% in Bulgaria (one of the lowest corporate tax rates in the world). So, should more EU countries consider tax relief for their tech start-ups?

Want to learn more about the the tax relief and tech start-ups in Europe? Check out our infographic below (click for a bigger version):

google_startup-tax-2

We had a comment sent in from Jack, who suggested that “tax amnesties” could be offered to start-ups for at least the first two years. Paying low (or even no) tax could help reduce the failure rate of start-ups, and encourage companies to grow.

To get a response, we spoke to Jake Ward, President and CEO of the Application Developers Alliance, an international advocacy network of software developers. What did he think of Jack’s suggestion?

For another perspective, we also spoke to Linda Griffin, Co-Founder and Chair of the European Tech Alliance, an organisation that helps European tech companies grow and scale up their bussinesses. Does she think that temporary tax amnesties could help give a boost to Europe’s tech industry?

Should tech start-ups pay no taxes for the first few years? Would it help encourage innovation and the growth of a thriving European tech sector? Or are there better ways to support innovation? Let us know your thoughts and comments in the form below, and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: CC / Flickr – Qwarzz


61 comments Post a commentcomment

What do YOU think?

  1. Oli Lau

    What about : should young companies pay not taxes for the first few years? Why limiting such an idea to “tech start-ups”.That isn’t fair. If it is such a good idea, it should be applied to all businesses.

    • Carmelo Barbieri

      Startups have ideas -> startups are too small to survive -> big companies buy great ideas

    • Oli Lau

      Google or microsoft or Apple used to be small startups. What you describe is a typical european problems. In other places they can grow.

  2. Gio Dimitriadis

    All start-ups, all young companies. But ONLY if there is a strict legal frame that will not allow existing bigger companies exploit this opportunity though loopholes.

    • Tola La

      Which has happened already! Shame..

    • Gio Dimitriadis

      I would say “It has to stop” but we all know that it will not

  3. Bobi Dochev

    NO! They shouldn’t! What is the difference between any start up?! Tech company or grosery store they all have same problems! Equality – widely promoted EU “value”, don’t you remember?!

  4. Michael Šimková

    That’s silliness. If tech startups already have an advantage in the economy they don’t need to be made even more advantageous. Generally speaking, startups should be incentivised. High flat fees that are charged independent of revenue (or loss) strongly discourage them by increasing the risk for the entrepreneur. So it depends on the taxes and how they are collected.

    • Jean-Pierre Rosa

      Do they not benefit from services and infrastructure ?

    • Matteo Bernunzo

      Because in old Europe we like public streets, education and healthcare

    • Simon Ranson

      Jean-Pierre Rosa Nope. The local population (a.k.a. the employees) do. The company is just a piece of paper.

    • Simon Ranson

      Matteo Bernunzo Then pay for them yourself.

  5. Monique Taxhet

    They should pay no tax but according to the level of their profit. In other words, up to a certain level zero tax, between x…and…x, a lower top-level etc.

  6. Jan Nieuwland

    No ! They should be able to get acces to loans to build there company or an eu share participation programme. If a company makes profit it should pay taxes. Eu is not waiving my private taxes either !!

  7. Simon Jefferson

    Asinine suggestion. Mind you would be good if the likes of facebook, Google, Apple and low techs like Amazon and starbucks paid ‘kin tax!!!

  8. Paul X

    If corporation tax really was the biggest reason for not starting up a business then Bulgaria would be the Digital capital of Europe…..this suggests there are plenty of other reasons

  9. Francesco Veronese

    Questa è la tua speranza. I tuoi dubbi più o meno inconsci sono ben radicati nel profondo del tuo io e hai perfettamente ragione perché costoro hanno modificato in peggio ben 47 articoli della vera COSTITUZIONE. Sai chi l’ha scritta tra gli altri? Benedetto Croce, De Gasperi, Pertini Calamandrei. Barattare con Renzi la Boschi e Verdini una siffatta COSTITUZIONE per accettare la schifezza costituzionale partorita nel buio della stanze segrete del peggiore pd di sempre significa essere degli irresponsabili. Pensa solo per un attimo se il 5 Dicembre vince l’accozzaglia Renzi e compagni di merende e di schiforme e che ha intorpedito le coscienze e lacerato il paese, sic! Se il 5 Dicembre costoro dovessero essere i vincitori di Pirro: tutti noi ci troveremo catapultati in un film dell’horror ed il Paese non sarebbe più quello disegnato ed immaginato dai Padri della Patria ma precipiterebbe in una volgare e schifosa oligarchia. Votare NO per fermare l’arroganza di Renzi e compagni di merende. Anch’io voterò un bellissimo NO! Help Italian people. Storing Renzi the people don’t love this man!

    • Federico Foschini

      Ma esattamente il suo commento che cosa ha a che fare con la politica fiscale per le startup?

    • Francesco Veronese

      Veda Federico, domenica 4 DICEMBRE saremo chiamati a fermare la schifezza costituzionale ideata da Renzi la Boschi e Verdini. NO-NO-NO-NO non possiamo ne dobbiamo BARATTARE la vera ed unica COSTITUZIONE ( scritta da Calamandrei, Pertini, De Gasperi, Croce ed altri benemeriti costituenti con la peggiore SCHIFORMA costituzionale mai scritta prima d’ora. Per questo lanciamo un ALLARME a tutti per fermarla votando milioni e milioni di bellissimi NO!A proposito di referendum: mangereste una carriola di letame perché all’ interno c’è un fagiolo, sic? Sicuramente NO! La SCHIFORMA Renzi la Boschi e Verdini è come quella carriola di letame e deve essere assolutamente bocciata. Hanno modificato in peggio ben 47 articoli della vera COSTITUZIONE. COSTITUZIONE scritta dai Padri della Patria quali: Calamandrei, Pertini, De Gasperi, Benedetto Croce e molti altri benemeriti non può essere barattata con la schifezza ideata da Napolitano con Renzi la Boschi e Verdini nel buio delle oscure stanze del peggiore pd della storia. GIÙ LE MANI DALLA NOSTRA BELLISSIMA COSTITUZIONE. Votare NO è un imperativo democratico e responsabile. Anch’io voterò un bellissimo e responsabile NO!

    • Lorenzo Caprini

      Federico Foschini , avresti anche potuto chiedergli la ricetta della carbonara, la risposta sarebbe stata la stessa….

  10. Michael Charles Becker

    this concept has merit… but in the real world large corporations will manage to get hold of it and get the benefits for themselves… they always do.

  11. Helge Pharrherr

    Not paying taxes for the first year could be a good way of spurring growth, there’d need to be a clause that prevents abuse by dissolving and reforming repeatedly though.

  12. Oli Lau

    Well if you think it works for “start-ups” why not applying the same politic to every single companies in Europe and not just the fancy “startups”.

    That’s not fair.

    • Slavi Richmart

      Any new company is a “Start-up”

    • Oli Lau

      that’sn’t what they meant. They keep talking about the “tech sector”.

  13. Hr Tom Mosen

    the only thing that will lead to is major companys exploiding that possibillity, and gobbling up whatever ressources that was ment for minor companys…its seen everywere this have been tried…
    in that sence its just another way for the corrupt politicians in bruxelles, to cannal more taxpayer money to their freinds in big buisness

  14. Ivan Burrows

    .

    With Brussels about to put four new taxes on every EU citizen & EU own resources taxes on the way any reduction for certain sectors would be meaningless.

  15. Ivan Burrows

    .

    With Brussels about to put four new taxes on every EU citizen & EU own resources taxes on the way any reduction for certain sectors would be meaningless.

  16. Παυλος Χαραλαμπους

    Start ups in general should pay lower taxes and also governments should do something about buriocracy which kills companies and make younger people avoiding the idea of starting their own companies

  17. Chris Pavlides

    ALL KIND OF START UPS! Especially the one launched by 40-50 years old UNEMPLOYEDS. I suggest special project funding tools, 0% tax for the fist 4-5 years & then scalable increase. These people have REAL life experiences, usually corporate background & business mentality thus their efforts could have much better chances to survive and grow up GloCally. Deliver real value to market but most important absorb and develop further other young unemployed etc.

    • Ludovic Bouvier

      We have this in France. The problem is that most managers sell their company as soon as they need to pay taxes.

    • Chris Pavlides

      Unfortunately in mine, following the catastrophic capital controls they apply 80% income tax plus other on property ownership to independent professionals, SMBs & still they have the nerve to talk about new entrepreneurship …

  18. Chris Pavlides

    ALL KIND OF START UPS! Especially the one launched by 40-50 years old UNEMPLOYEDS. I suggest special project funding tools, 0% tax for the fist 4-5 years & then scalable increase. These people have REAL life experiences, usually corporate background & business mentality thus their efforts could have much better chances to survive and grow up GloCally. Deliver real value to market but most important absorb and develop further other young unemployed etc.

    • Chris Pavlides

      Unfortunately in mine, following the catastrophic capital controls they apply 80% income tax plus other on property ownership to independent professionals, SMBs & still they have the nerve to talk about new entrepreneurship …

  19. Jurre

    And open up another loophole for multinationals to avoid taxes? No….
    There are better ways to provide financial support. Make sure there is enough starting capital (not just for tech companies) and reduce bureaucracy for small starting companies so they can get started. Once their idea flies, they can afford to pay taxes just like everyone else.

  20. Nando Aidos

    No! Startups have a 90% failure rate. Why? Well, because the ideas were not that smart after all. Why should I pay for this?
    Find a better way to encourage startups with a chance to succeed. I am not interested in pissing off 90% of the money.

  21. nando

    No! Startups have a 90% failure rate! Why? Well, because the ideas were not so smart after all. And so, why should the taxpayer pay for this?
    Find a better way to encourage startups with a chance to succeed. I am not interested in pissing off 90% of any tax subsidies.

  22. Belamie Versco

    tax is just a percentage, nobody is hurt by that. the problem is social insurance premiums that are a flat fee before you’ve even earned a cent.

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