"Measures to cut taxes on local services, bigger public handouts and setting up of companies with just one euro in capital were adopted by the European Commission on Wednesday to help smaller firms create jobs.The Small Business Act seeks to enshrine a "think small first" approach to rulemaking at European Union and member state levels to cut red tape in a sector that accounts for 99 percent of all businesses in the EU.
"Small and medium sized enterprises are the job creation machine in Europe but policymakers at all levels don't sufficiently grasp this," EU Industry Commissioner Guenter Verheugen told a news briefing.
The centrepiece is a law for a European private company or societas privata europaea (SPE) that small firms can use to operate across the EU and avoid a 27-state legal labyrinth.
EU Internal Market Commissioner Charlie McCreevy said the potential savings on legal costs could be between 2,000 and 10,000 euros for setting up a company, and between 750 and 8,000 euros for day-to-day costs.
"Second, the SPE may be set up with a legal capital of only one euro. This could result in cost savings of up to 35,000 euros in some member states," McCreevy said.
More controversially, a company can register in one EU state and operate completely in another state, a provision that McCreevy expects to spark "lively debate" among EU states and the European Parliament whose endorsement is needed.
"The European Private Company Statute is an interesting initiative that could encourage SMEs to develop their international business," said Jonathan Zuck of the Association for Competitive Technology. Other business lobbies were cautious.
"The policy principles presented today by the European Commission cannot remain a dead letter," said Andrea Benassi, secretary genearal of small company lobby UEAPME.
"If member states do not follow suit and benefits are not transferred to Europe's small entrepreneurs, today's words will ring hollow for us," Benassi said.
Eurochambres, which represents chambers of commerce, said many measures depended on the goodwill of EU states to act. The British Chamber of Commerce called the package a "mish-mash of watered down proposals".
EU Tax Commissioner Laszlo Kovacs will next week propose to extend reduced rates of value added tax on local and labour intensive services beyond 2010 when they are due to expire.
Without the extension, the price of haircuts, bicycle repairs and home repairs in many EU states would jump but some countries like Germany are leery of reduced rates. Unanimity is required in all EU tax matters.
"New data shows us clearly that this is a very targeted measure that has positive results for local employment," Verheugen said.
Also next week, EU Competition Commissioner Neelie Kroes puts forward a revised system for granting state aid to smaller firms so that handouts do not have to be pre-approved by Brussels and the percentage of aid in the total investment can be higher.
Brussels will also propose amending EU rules on late payments to help cash flows at small companies.
"Delays in payments are one of the major reasons for failure for SMEs and thus a loss of jobs in Europe," Verheugen said.
EU leaders will be asked in December to endorse 10 binding "think small first" principles such as applying an "SME test" to all legislative proposals, a step several lobbies welcomed."
Source: HVG
01.07.2008