How 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?
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!