MORE THAN 15,000 people have expressed their support for a petition to exempt technology startups from national tax and labour laws in the European Union.
Called EU Inc, the petition proposes that the 27-country bloc establish a common legal regime for startups to eliminate barriers for the mobility of funding and employees, and – consequently – enable startups to compete with the US.
“The multitude of countries and cultures in Europe is its unfair advantage. But because of that, our startup scene is fragmented. Legal and regulatory compliance is a burden, and cross-border collaboration is rare. While US angels invest coast to coast, European capital sticks within national borders,” the petition reads.
“In a nutshell European entrepreneurs have to be unfairly lucky to be successful in creating large companies in Europe – or they need to migrate to the US.”
One of the first supporters of the petition is Ilkka Paananen, the co-founder and chief executive of Supercell. Paananen in February argued to YLE that the success of startups critical for the union and the future of the welfare state.
“[It’s about having] the same, simple and competitive rules for startups. They’d deal with, for example, how companies can raise funding, hire skilled employees from overseas and how companies are taxed,” he summarised to the public broadcasting company.
“My thinking is that if you think about global value creation over the, let’s say, next couple of decades, it’s very likely that the largest share of value creation will arise through technology and especially through new innovative technology. And if and when we in Europe want to be part of this competition, it’s critical to make Europe the best place to found and grow these kinds of technology companies.”
“It creates value for us all. It makes it possible for us to hold on to European values, including the idea that we have a welfare society.”
Paananen said the idea has been brewing in the startup community for a long time. Also supporting the petition from Finland are Miki Kuusi, the founder of Wolt, and Aino Bergius, the chief executive of Slush.
Fuelling the petition is a long-standing concern that the continent has fallen well behind the US and is at risk of falling also behind China.
Although European startups have caught up with their US counterparts in recent years in terms of the amount of funding raised, the gap remains significant. While US startups brought in 200 billion euros in investments in 2024, European startups brought in 43 billion euros and Chinese ones 38 billion euros, according to data from Atomico and Pitchbook compiled by YLE.
Paananen argued that the current situation creates a number of concrete problems. EU countries, for example, have vastly different approaches to taxing shares and stock options offered to employees – a common practice in the startup world.
Regulations on hiring similarly differ from one member state to the next.
“The key thing is that it’d be as easy as possible to hire top-notch talent from outside the EU. And that if you’ve got a permit to come to Finland, the same permit would also be valid in Sweden,” summed up Paananen.
The Finnish public broadcasting company pointed out that the concerns are shared also among lawmakers. President of the European Union Ursula von der Leyen, for one, has made statements echoing the concerns of the startup community.
“A startup from California can expand and raise money all across the United States. But a startup in Europe has to deal with 27 different national barriers. We need to make it easier to grow in Europe,” she stressed in outlining the commission’s agenda to the European Parliament on 27 November 2024.
Despite the political support, the petition is hardly a guarantee to succeed, added YLE. Tax and labour laws are part of the heavy legislative core of member states, meaning abandoning them is likely to take time, as well as invite questions from other parts of the corporate world about why startups specifically require exemptions.
One clear stumbling block is that a common legal framework could reduce tax revenue for some member states.
“This won’t be easy,” Petri Kuoppamäki, a professor of corporate law at Aalto University, estimated in an interview with the public broadcasting company.
He did describe the idea as interesting, though, drawing a parallel to the reforms championed by Jacques Delors, who headed the European Commission in 1985–1995. Delors is credited for having a key role in creating the single market, the common currency and the modern European Union.
“Today we’re in a bit of a similar situation. Europe has fallen behind in innovation especially in terms of digital markets, and this initiative is an attempt to address that,” commented Kuoppamäki.
Aleksi Teivainen – HT
