French government 'is in breach of European law'
The European Commission has warned the French government that it could be taken to the European Court of Justice unless it stops taxing donations to foreign non-profit bodies.
France waives tax on donations to domestic non-profit bodies but taxes donations to foreign charities at 60 per cent. The commission said that if France did not agree to give equal treatment to all EU-based non-profit organisations within two months, it might refer the matter to the European Court.
The UK was among a number of countries issued with a similar 'infringement procedure notice' in 2006, asking it to give the same tax relief on donations to foreign non-profit organisations as it does to UK charities, but has never responded.
Simon Weil, chair of the European Association for Planned Giving and a partner at law firm Bircham Dyson Bell, said the commission might be taking a more aggressive approach in the wake of an ECJ ruling earlier this year that a German donor, Hein Persche, was entitled to tax relief on a donation to a Portuguese charity.
"If the French play a waiting game like the British government, it might just gather dust," he said. "But they are both palpably in breach of European law and this cannot be ignored indefinitely."
Bill Lewis, a tax consultant with law firm Bates Wells & Braithwaite, said the Treasury would resist change for as long as possible because it feared lack of control over foreign recipient charities could lead to abuse of the taxation system.
Clive Cutbill, who leads the philanthropy practice at law firm Withers, said the Netherlands had devised a system that allowed it to check whether foreign organisations met its own criteria for tax relief. "If I were the commission, I would be saying 'if the Dutch can do it, so can you"," he said.