Mr. Van Peteghem (CD&V) intends to revamp the taxation structure for copyright income. The aim is to regulate who benefits from the existing system, which can yield positive or negative outcomes depending on its execution. Here's my perspective, hoping it provides value.
Belgium stands out as one of the European countries with the highest taxation on employment. For instance, out of a company cost of €5,000/month, an employee takes home a net salary of €2,131/month (or €2,835/month when accounting for the 13th month, meal vouchers, etc.).
Thankfully, to enhance our competitiveness, there are measures in place to mitigate challenges. Among the most significant is income derived from intellectual property. By allocating 25% of their time to intellectual property, our developers see their net income rise from €2,131/month to €2,469/month, with no change in business costs. (View our gross/net simulator for details).
The influence of developers, as indicated by Odoo statistics
Software crafted by our team of 300 developers:
- generated 270 million EUR in license sales in 2022 (half of which originates from overseas sales but is paid to Odoo SA, thus reinvested in the Belgian economy)
- facilitated the employment of 2,500 direct and 100,000 indirect positions (including 5,000 within Belgium)
- resulted in the company being valued at over €4 billion, with approximately 10% owned by Walloon public funds (exceeding €400 million, which will eventually be reinvested in Belgian startups!)
In summary, each developer employed at Odoo has led to the creation of 17 indirect jobs, solely within Belgium.
When an artist creates music, their compositions have the potential to be sold thousands of times. This underscores the importance of investing in intellectual property; we are essentially crafting an asset that may yield significant returns over time.
The same principle applies to developers: as they create software, they are generating intellectual property (recognized as literary works under the European Berne Convention), which serves as a valuable asset. This asset can contribute to various aspects such as employment generation, simplifying the lives of users, attracting capital, and more.
Revoking developers' rights to declare intellectual property presents numerous challenges.
Issue 1: Competitiveness
Each year, only 80 developers graduate from UCLouvain (master + polytechnic) while Odoo alone aims to hire 200 annually. To address this shortfall, our solution is to recruit talent from abroad and bring them to Belgium.
The issue arises when these developers realize the net income they'll attain in Belgium, which can lead to disillusionment. Removing intellectual property rights would exacerbate this situation, posing a significant obstacle to our capacity to attract talent and innovate effectively.
Belgium relies on talent, and salary plays a crucial role in individuals' decisions regarding the choice of company and country of residence.
Issue 2: Diminished Employee Net Worth
How can we justify to our employees that their net income will decrease from €2,469/month to €2,131/month? Undoubtedly, this will adversely impact our retention efforts. Developers have ample opportunities to work remotely for companies located in countries with lower tax rates.
Currently, Odoo can manage to provide some compensation, but the majority of technology companies will face challenges if they are required to augment their employees' net income, especially in conjunction with an index surpassing 10%.
The government ought to bolster job-generating sectors, rather than weakening them.
Issue 3: A Core Challenge
Every entrepreneur understands the necessity of investing resources in profitable endeavors while minimizing or halting activities that do not yield returns. Similarly, a pragmatic government should prioritize initiatives that drive job creation, add value, or attract capital to Belgium.
The technology industry comprises:
- one of the primary drivers of employment growth [1],
- well-positioned to attract foreign investors and capital,
- a domain where research investment thrives, owing to intellectual property
Suggestions
Recommendation 1: Limit remuneration to 30%
Introducing a cap of 30% of revenues allocated to innovation for all (artists & developers) appears to be a reasonable approach: it preserves the incentive to invest and hire developers while curbing excesses for those who disproportionately benefit from the system.
Recommendation 2: End misuse (updated November 5th)
There are instances of misuse in the current implementation of intellectual property. For instance, Odoo's tax ruling permits us to designate 15% of our consultants' time as intellectual property.
Honestly, the allocation of 15% of our consultants' time is open to debate; the intellectual property they generate serves only one client, unlike a developer who creates software utilized and sold to millions of users.
One potential solution could involve reducing copyright taxation on works intended for distribution, in line with European directive 2009/24/EC which defines works (computer programs are included in this definition).
Limiting the reduction to "broadcast" works would restrict the scope of copyright income, excluding service activities that involve creating documents "for a single client" or for internal use (such as lawyers, consultants, directors who draft "internal procedures," etc.).
This approach could help alleviate the deficit for the state concerning copyright (supporting Mr. Van Peteghem's other commendable proposals: reducing the overall salary burden by closing tax loopholes), all while maintaining the incentive for research and development in computer software, which serves as a significant driver for the economy and employment
With the expectation that our government will make a reasoned choice.
I trust that the government will recognize that the €85 million saved on intellectual property is outweighed by the thousands of jobs created by Odoo, as well as the hundreds of millions of euros repatriated to Belgium thanks to Odoo and other IT companies. Therefore, excluding computer software from the category of "works" protected by copyright does not truly yield any gains.