Anyone know what the situation in Europe is?
Most European countries don't have deductions for SW devs. Romania had it for a long time and removed it due to gov budget deficits. Some other CEE countries might still have them, but in general most socialist western European countries don't have them, which is why they don't have a tech industry.
What do you mean? I am in Eastern Europe and as far as know software development costs are fully deductible just like any other employee costs.
Even more so for startups in Estonia and Latvia (probably Lithuania too) you can fully deduct R&D in general - not sure for how long.
That is you have you have 1M in sales 200k in net profit(after paying for everything including software development).
If that 200k in net profit is plowed back into speculative R&D it does not incur income taxes until money is paid out.
Even more so you can invest some 200k pre-tax in assets such as buildings. You only get taxed when you actually take out the money. In a way this is a pretty big loophole provided you are actually cash flow positive.
Basically in Baltics you can follow the early Amazon strategy of not making net profit, but investing in growth.
>What do you mean?
Exactly what I wrote.
>I am in Eastern Europe and[...]
Eastern Europe is not a country. Every EU country has completely different legal and tax regimes. And I specifically said that some CEE countries are the exception and do exactly what you said, but that high-tax/high-welfare EU countries usually do not, since their welfare deficit is so high they don't hand out special tax incentives for SW industry as they need to tax everything that moves in order to not go bust, and due to their tiny SW industry, tax breaks for SW work would be politically unpopular with the majority voters working in other industries which see SW devs as overpaid and spoiled already. It's a tragedy of the commons coupled with crabs in a bucket mentality.
So how does your comment contradict mine? Read it again, maybe you missed it.
>you can fully deduct R&D in general
Depends what each country defines as R&D in their legal framework and how much creative accounting you're legally allowed to do. Some countries don't count web app development as R&D though, so of course have a lot less successful unicorns, and a less developed SW industry. R&D tends to be more like pharma, aerospace, lasers, bio engineering, that kind of stuff, not building another food delivery app.
Is that a special case for SW devs or they also aren't able to deduct other employees?
"which is why they don't have a tech industry"
We do have a tech industry, just not large behemoths.
Looks like politicians dream about creating behemoths, and they dream about unicorns too.
Europe doesn't have any behemoths that are younger than 40+ years but every behemoth that Europe has was once a start-up too in the distant past: Novo Nordisk, ASML, Airbus, Bosch, Siemens, VW, Nestle, etc. How do people forget this?
Behemoths are important because only they have the massive R&D budgets to experiment on new and risky ventures, but also have the economies of scale to built massively expensive and complex things like rockets, hyperscalers, etc.
You can't have a powerful growing and internationally competitive economy just with "Mittelstand" mom & pop shops making niche knick-knacks, you also need behemoths. Why else do you think the German military is contracting Google to build them an on-prem cloud and not a German company?[1] Because Germany, like all of Europe, has no SW behemoths that can do the thigs Google can do at that cost and scale. That's why behemoths are important.
[1] https://www.heise.de/en/news/Bundeswehr-relies-on-Google-Clo...
> Behemoths are important because only do they have the economies of scale to take massive losses on R&D and built massively expensive and complex things like rockets, hyperscalers, etc.
I think you meant:
The main advantage of behemoths is their ability to buy startups like candy when they are to big and become risk-averse. Then you don't see startups becoming behemoths anymore, except for the unicorns (called unicorn for a reason).
You're not wrong, but what you're saying doesn't invalidate what I said. It's an orthogonal issue.