SEABISCUIT

Before I say anything else, I would like to wish all of you a very happy and prosperous 2009!

PRESIDENT OBAMA’S BAIL-OUT PLAN
While I have no real interest in horses, horse racing, or any sort of gambling, I liked this film's harsh and painful portrayal of what it takes to grab a chance in life when it comes along. Based on the book by Laura Hillenbrand, the 2003 movie, directed by Gary Ross, is set in the era of the Great Depression, certainly one of the bleakest periods in American history, apart from wartime. But unlike wartime, with its battles fought far from American soil, the victims of the Depression experienced full-scale devastation right in their own backyard.

Seabiscuit was born on May 23, 1933 and started racing two years later. In his first major achievement, he captured the 1937 Massachusetts Handicap. I have already used his story in my July/August 2004 column to illustrate the fact that sometimes life gives us second chances, like it gave Seabiscuit, condemned at first as a loser before getting a fair chance. Indeed, many of the characters in the film undergo torment – sometimes physical, sometimes spiritual, and often both – before finally triumphing over their odds.

As I refer to this story again today, a huge wave of hope is rising up from Mr. Obama’s election and inauguration, sweeping across America and the rest of the world. But since no one man or administration can measure up to such exorbitant expectations, the media around the world is already predicting serious disappointments.

The media is also comparing President Obama’s “bail-out plan” to President Roosevelt’s “New Deal” policy. Now, I do not have the expertise to comment on this comparison, nor will I express an opinion about the soundness of the plan, which is supposed to pull the USA out of recession. However, one small aspect did catch my eye, leading me to certain conclusions that I would like to share with you. The Great Depression is considered to have started on “Black Tuesday,” October 24th 1929. President Roosevelt did not start his term until March 4th 1933, which means that this extremely destructive crisis lasted for over three years – perhaps even four, according to some historians – before the American people felt that their lives began to improve. Today, our fast-paced life gives us little time to reflect on the extent of this catastrophe; that is, unless we spend some time with people who lived through those years and were severely crushed. When they talk about what happened then, there is such a cloudiness in their eyes that it is impossible not to catch a glimpse of the horror they endured. John Steinbeck wrote several books that beautifully describe the devastation of the period, a harrowing time we tend to forget today.

The current crisis is considered to have started with the collapse of the Lehman Brothers bank on Tuesday, September 16th 2008, just four months and four days before the beginning of President Obama’s term. Many believe that this crisis is as bad, if not worse, than the Great Depression, and at the same time hope that Mr. Obama’s $825bn recovery package will turn the American economy around. The significant difference here is that while President Roosevelt implemented his plan about four years after the crisis began, President Obama is implementing his only four months later.

For me, this distinction has enormous consequences, since the plan submitted to Congress is the new administration’s solution to end the economic crisis at its early stages so that it never becomes the decade-long tragedy that was the Great Depression.

Of course, considering the enormous sum required for the plan, even the most hopeful of citizens is concerned about its cost to America. But I would like to frame this issue quite differently. I am still waiting to read a sound and complete financial analysis of the cost of keeping a family in their home versus that of socially reintegrating a homeless family, taking into account the fact that after four days’ street life one is officially considered homeless. The same kind of analysis should be done comparing high school graduates who go to college with those who go to work to help support their family – a common occurrence during the Great Depression. While we always hear criticisms of the government for giving or lending money to the wrong people or the wrong industry, we never hear about cases where government aid helped in the long run, especially when it has ensured that a large section of society has not been broken and that the country continues to function without much wreckage. This money never appears on the balance sheets.

To me, striking success stories of a "self-made man" building an empire are often stories of an ability to create the setting for a second chance in life. Sometimes, getting out of the low times in life means paying with blood, sweat and tears, living through hell for months or years before all the hard work bears fruit and a second chance comes along. At the same time, such ambition is never a good enough reason to let the market rule people’s lives, since for every success story there are countless men and women who never resurface or return to the main street of society.

Like the plans President Roosevelt implemented in his time, President Obama’s plan is an appropriate answer to the situation his country is facing right now. I would even go as far as to say that this is a genuine American solution, tailored to the American nation, despite the slandering tongues of the past that labeled President Roosevelt a “communist” for his plan.

I have always been fascinated by the powerful bond that exists between individual American citizens and their country and leadership. Yes, there is a strong sense of pride tied up in the American identity; but there is also this bond, which I would summarize as follows:

“I am free and have the right to do as I please and to be successful. The state is there to protect me for only the most essential things in life.”

On the other side of the Atlantic, the protection offered by many European countries is much more general. An illustration is the extreme version Scandinavian nations provided in the 70’s and 80’s, which covered almost every misfortune or calamity that can occur. Even if this could be seen as an exaggeration of the facts, it is true that almost no crisis could drive a citizen out of mainstream society. In my view, the new American plan addresses the needs of a large portion of the population currently in danger, much in the same way that relief efforts were expected in the aftermath of Hurricane Katrina, 9/11, and so on.

As I often say when explaining my profession: “Lawyers practice law and I practice people.”

I fully acknowledge how inaccurate this statement may be, but it simply says a lot about the importance I put on people, their hopes and needs. It also clearly explains why I support President Obama’s relief plan.

THE SENIOR MANAGEMENT LIABILITY INCLUDED FOR NON-PROFIT ORGANIZATIONS
For the last four centuries, France has had corporations of some sort, and the laws managing them have evolved over time. A major milestone was reached when the limited liability corporation was created, since it added a very valuable level of protection to people involved in a corporation. In short, this law ensures that shareholders cannot financially lose more than what they have invested. Also, any debts are the responsibility of the company itself; private individuals cannot be liable for them.

Without reviewing the entire four-hundred-year history, over time both this law and court system rulings have put an extraordinarily high level of liability on senior management. The French Labor law is one reason for this trend, stating that the employer is responsible for employee errors on the job. Another reason is that the French court system considers that in the case of excess company debt, senior management has done something wrong and is thus personally responsible for the debts. This analysis is also extended to accidents in which people get hurt or even die, explaining how the president of a non-profit organization can be personally sued in court over an outing with children that ended in a fatal car accident. Indeed, the cause of the accident can only be explained as the fault of the chaperones, and therefore the liability goes all the way to the top, i.e., to the president and the managing director of the sponsoring organization or association (for the children’s program), if there is one. In this example, proving that the situation is no-fault according to traffic laws does not legally make it a no-fault incident. This is why the French insurance industry has issued policies to cover senior management for all financial consequences of such personal and corporate lawsuits, unless the suit involves proven criminal deeds.

Further illustrating the consequences of this trend is the fact that a growing number of small towns are having problems finding enough candidates to elect a mayor, as the position entails a high risk of serious liability without comparable financial compensation.

The current French government is working on changes to the law that would limit such lawsuits and reinstate a strict boundary between the liability of the corporation and the people involved in it, especially senior management. This effort is part of a much bigger move to liberalize business in France, and, specifically, to make it less regulated.

Best regards,

Q & A

AUTO-ENTREPRENEUR STATUS FOR FOREIGNERS

QUESTION
I am an American citizen and ESL (English as a second language) teacher, and have employee immigration status (I hold a carte de séjour salarié). I want to sign up on the Auto-Entrepreneur site with my social security number. Is it true that I can add a combination of any other work, such as photography, private English classes, and so on, as long as it does not exceed the cap of 32,000 euros? Do you know of any “hidden danger” in doing this?

ANSWER
This new type of secondary business status was just made available on January 1st 2009. So my first reflex would be to state that there is no track record for how the French administration will interpret and, in turn, enforce the new law. This is especially true in terms of the fiscal and immigration consequences. Furthermore, the fact that this law goes against many long-standing trends in the French administration also indicates that one should proceed with caution here. Past attempts to free up business in France have had a much smaller effect on businesses than what one would expect from a literal interpretation of the new laws. So this law, too, should be regarded in the same way until proven otherwise. The French tax administration and préfectures will tend to continue addressing issues as they always have.

This said, it is already clear that this law is a breakthrough on several levels:

1 – The requirement for double-registration no longer exists
It has always been possible to have a secondary activity in retail or as a craftsman, but it required registry with the tax office and professional authority, such as la chambre des métiers et de l’artisanat for the craftsman and les greffes du Tribunal de commerce for retail. This obligation has been eliminated, so it is extremely easy to start a secondary activity. However, I raise the potentially complicated issue of someone who wants to be for example, an electrician as a secondary activity, but who might not be able to get professional liability insurance because he does not have the professional license. How such a case would pan out is completely unknown at this point.

2 – The online fiscal registration for obtaining the SIREN – SIRET
Following online submission of the self-declaration, an automated receipt is sent from the website, which (assuming the forms have been completed correctly) is then followed by a more formal receipt (récépissé) from the Centre des Formalités des Entreprises (CFE). Declarations made in person will receive a paper récépissé.

3 – The taxation of the business (income tax, VAT)
The preferential treatment for businesses making less than 32,000 euros has existed for years. It applies to both income tax and VAT and is called MICRO BIC or BNC.

The creation of the micro-fiscal simplifié definitely goes a step further than this since the individual can choose to pay all income tax by paying:

1% of turnover if re-selling goods or materials,

1.7% of turnover if considered "commercial" or "industrial,"

2.2% of turnover if in "liberal" professions.

These payments can be made in either monthly or quarterly installments.

Assuming there are no additional revenues, under this system the auto-entrepreneur's income tax is fully paid. As noted, the nonpayment of VAT for incomes under the 32,000-euro limit has existed for years. All that is needed is to state the following notice on every invoice: TVA non-applicable, article 293 B du Code Général des Impôts.

4 - The social charges, Social Security or les charges sociales paid for the business
This item is an absolute novelty and should be checked with a hawk’s eye. If indeed this sticks, it could be a definitive breakthrough in the French approach to tax payment.

Up to now, what is called les caisses, which is also commonly (and inaccurately) called “URSSAF,” has billed businesses with a delay of one to two years. Even if the tax is indeed owed when a sale is made and generates profit, for the first 18 months of activity, URSSAF bills estimated installments to bridge the gap until the French administration has accurate information regarding the amount of sales and profit through the income tax declaration. While this system has long been criticized as incomprehensible, the French administration never gave up on the idea that it should determine the amount of the bills, first by establishing the across-the-board amounts to be paid, and then by basing them on the amounts of sales and profits.

So with the creation of the micro-social simplifié, the payments will be made based on the true level of sales, not on set amounts determined by the French administration. This means that the amounts paid cannot be verified right away, since they are based on amounts unknown to the administration and by paying:

12% of turnover for those re-selling goods or materials,

21.3% of turnover for those offering services,

18.3% of turnover for those in "liberal" professions, in which the pension is handled by the Caisse Interprofessionnelle de Prévoyance et d'Assurance Vieillesse (CIPAV).

5 – The bookkeeping obligation
The auto-entrepreneur is required to keep a ledger of all revenues received. In addition, the auto-entrepreneur re-selling goods or materials, or providing furnished accommodation, must keep a ledger of all business expenses. Finally, copies of all invoices, receipts, and formal offers/quotations must be retained.

6 – Limiting liability tied to the business
While the auto-entrepreneur has unlimited liability regarding the operation of the business, it is possible to make, in the presence of a notaire, a déclaration d'insaisissabilité, protecting the business-person's home, along with any assets not directly associated with the running of the business, from seizure.

Considering the above as well as the long-established trends of the French legal and judicial system, this new business status is such an oddity that I strongly advise anyone to proceed with extreme caution until the Cour de Cassation (French Supreme Court) has ruled on it in a way that creates a definitive precedent.

However, despite this well-founded suspicion, these new rules do represent a significant breakthrough for French business, creating a setting that is similar to the American model in terms of tax payment and registration. The French president has always been consistent about his vision of what business is about, and this move is a direct consequence of his unwavering purpose.

The immigration issue related to this status
Now, it is important to note here that I know nothing about how this new system might affect immigration status; in fact, I am not even sure the question has actually been addressed. Your carte de séjour mention salarié allows you to be an employee in France. If I apply the current immigration regulation to this new system, you do not have the right to register for it without immediately losing your right to live in France. For now, you have the right to live in France because you work for a French employer. This is the only status to which you have a right. Moreover, if you change your employer, your right to maintain employee status in France could even be questioned if the civil servant considers the new job too different from the previous one.

Also, as I have often noted regarding immigration procedures and laws, the prefecture demands French diplomas for certain jobs, such as craftsmen, and I see no reason why it would not apply the same rule to this new status (which would defeat the very purpose of creating it). This assumption could also be made about the requirement to register with one of the two professional organizations mentioned above.

Furthermore, I have not heard or read anything about professional organizations helping immigrants with this, which to me indicates that the prefecture has no intention of addressing the issue. What this means is that only carte de résident holders can safely register for this status, which rules out the vast majority of foreigners in France. I would, however, investigate the ruling regarding a carte de séjour mention vie privée holder, since it grants the right to work in all capacities. But even here one must not be too optimistic about the outcome.

On the whole, I would say that until the Ministère de l’Intérieur issues a specific ruling authorizing carte de séjour holders to apply for this new status and describes the guidelines and procedures for doing so, no one should take the risk of registering. In fact, if something went wrong while the prefecture was reviewing your request, the result of your registration would be an expulsion order, since the prefecture has no way to solve any problems arising during the process.

So to answer your question more precisely:

“Is it true that I can add a combination of any other work, such as photography, private English classes, and so on, as long as it does not exceed the ceiling of 32,000 euros? Do you know of any “hidden danger” in doing this?”

I would state:

“Yes, you can add any combination of other work, since this system allows exactly that, and YES, I do see enormous risks that are not worth taking at this point or in your current situation. You are much better off waiting until a significant track record is established and we can clearly identify the true benefits and liabilities.

For further information, visit the governmental site:

www.lautoentrepreneur.fr

NEW REQUIREMENTS TO RENEW A CARTE DE SEJOUR

QUESTION
We are American and have been French residents for years. This year when it came time to renew our carte de séjour mention visiteur, we got the form in the mail, which seems straightforward, except for the fact that the prefecture is now requesting justicatifs d'intégration such as:

• une attestation de formation civique,
• une attestation session d'information sur la vie en France (module 1 ou 2).
• une formation linguistique (various examples).

What in the world are these? They are also asking for justificatifs de couverture sociale. Could this be our health insurance?

ANSWER
Though I know why the préfecture is requesting these documents, I also understand your confusion about them, since they evidently did not exist when you first got your carte de séjour. Thus, these requirements do not apply to you, but were automatically listed on your renewal form because they were absent from your file. They will continue to be listed until the civil servant notes in your file that they are not applicable.

Even if these documents do not concern you, I would nevertheless like to answer your question, explaining what they are and the reasons behind them.

In 2006, the French government created a new way to handle foreigners holding an immigration visa, providing, among other things, a French-language evaluation and an information session about France, French law, and culture. This program was an attempt to both make foreigners feel more welcomed and appreciated, and to better evaluate them, thus exercising more control over who enters France. Therefore, what used to be a half-day medical visit is now a kind of orientation session taking place over several days. Indeed, there is now a contrat d’intégration which lists a series of obligations that must be met in order to renew the carte de séjour. Clearly one could interpret these requirements in two ways: one interpretation is that they are meant to help the foreigner speed up the integration process; the other is that they can be used to justify refusal of immigrant status.

So the first document, une attestation de formation civique, is a certificate stating that you have attended the presentation on French policies and laws that foreigners should be aware of.

The second one is une attestation d’avoir assisté à une session d'information sur la vie en France (module 1 ou 2). It indicates that you have attended the informational sessions on the customs and traditions of French life.

The third one, une preuve d’une formation linguistique, is proof that you attended French courses if required. (If the applicant’s level is determined to be quite good during the initial evaluation, exemption from this requirement is possible.)

Finally, couverture sociale indeed means health insurance.