Brussels orders tax cap overhaul
European Commission gives France two months to make changes to the bouclier fiscal
THE EUROPEAN Commission has launched official sanctions against France over its bouclier fiscal tax cap, on the grounds that it discriminates against people who pay tax in more than one country.
The EC will today issue France with an order to make changes to the system within two months. If France does not comply, the case could go to the European Court of Justice.
Brussels is not against the idea of the tax cap itself, but it says the current system appears to contravene the European principle of free circulation of capital.
This is because the bouclier fiscal, which caps individuals' personal taxation at 50 per cent of their income, only takes into account taxes paid in France.
The commission has demanded equal treatment of French taxpayers and those who are domiciled elsewhere but receive the majority of their income in France.
Nicolas Sarkozy is facing pressure to reform the system from within his own party. A number of MPs tabled an amendment to the 2011 budget calling for it to be scrapped.
The amendment was not passed, but Sarkozy has pledged to look at the bouclier as part of a bigger review of French taxation next year.
Last year, 18,764 people benefited from the cap, resulting in €679m of tax being refunded.
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What is the bouclier fiscal?
