EUROPE - The European Commission wants Belgium, Portugal, Spain and France to end tax discrimination against foreign pension funds – saying it is “incompatible” with the EC Treaty.

If the states do not comply they risk being taken to the European Court of Justice. Denmark has already been taken to the ECJ by the Commission over the issue.

The Commission has asked the four countries to amend their tax legislation under which pension contributions paid to foreign funds are not tax-deductible, unlike contributions to domestic funds.

“The Commission considers that preferential treatment for domestic pension funds is incompatible with the EC Treaty, which guarantees the free provision of services and the free movement of workers and capital,” the Commission said in a statement.

The move is a follow-up to the Commission’s action in February 2003 – when it began proceedings against Denmark, Belgium, Spain, France, Italy and Portugal.

"The Commission is determined to tackle tax discrimination against occupational pension funds in other member states," said Internal Market Commissioner Frits Bolkestein.

"Unless member states end tax discrimination, the EU will continue to deny future pensioners the full potential benefits of a pan-EU single market for pensions.”

The Commission’s requests have been sent in the form of so-called 'reasoned opinions' - the second stage of the infringement procedure. Initial requests for information had already been made to these states in February 2003, in the form of letters of formal notice.

“If these member states do not provide satisfactory action within two months the Commission may refer the case to the Court of Justice,” the Commission said.

It added that previous ECJ rulings – in the Wielockx, Safir Danner and Skandia cases - indicate that states’ scope to apply different rules is “very narrow”.

The Commission said it was making the move because the countries’ actions so far, and future plans, did not go far enough.