EUROPE - The European Commission’s recent move against discriminatory tax treatment in six EU states will favour cross-border mobility and could accelerate the move away from generous state pensions in Europe, says Mercer Human Resource Consulting.

"The Commission’s move will be welcomed by expatriates and multinational employers, as a positive outcome will help with cross-border mobility," said Mark Sullivan, European partner at Mercer. Although Sullivan admits that the possibility of a pan-European plan is still a long way off.

The move, however, is regarded as positive and a step in the right direction. "Significantly, this initiative has not been taken in support of an individual legal case through the Court of Justice. It has come directly from the Commission, and demonstrates its determination to eliminate tax obstacles to cross-border pension provision," adds Sullivan.

But the Commission’s move could result in an end to generous state pensions in Europe, believes Mercer. Explains Sullivan: "It is no coincidence that many of these six states provide some of the highest levels of social benefits in the EU. Consequently, they can only provide significant tax incentives for retirement saving in conjunction with reform of social benefits. With the current pressure on public finances, the extension of tax breaks could be the final nail in the coffin for generous state retirement plans."

Last week saw the European Commission take the first step towards legal action against six EU states that do not allow tax deduction of pension contributions to overseas funds, yet allow deductions to domestic funds. Denmark has been asked to amend its legislation, while a request for more detailed information has been sent to Belgium, Spain, France, Italy and Portugal.

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