Brussels, 15/11/2001 (Agence Europe) - The European Commission has asked France to take "appropriate measures" to put an end to the aid resulting from the exemption from the tax on insurance contracts enjoyed by mutual and provident societies. France must therefore either scrap the exemption or ensure that the aid does not exceed the costs arising from the constraints inherent in services of general interest. The tax in question (currently 7%) is normally imposed on supplementary health insurance contracts supplementing the basic health cover provided by the social security system. The Commission puts the spotlight on the selective nature of the exemption (only benefiting French mutual and provident societies) and the fact that the tax advantage is a state resource. Trade takes place within the common market in this sector, "with the result that the advantage in question might cause distortions of competition".
The tax exemption in question has been granted to mutual societies since 1945 and provident societies since 1947. Since it predates the Treaty of Rome, it is "existing aid" and therefore not considered state aid when it was introduced, but has become so since then because of changes in the market. The Commission also argues that since the third insurance directive came into force and was transposed to mutual societies (in 2001), the insurance market in the European Union has become more and more competitive and integrated and the existing aid in the form of tax exemption is no longer compatible with the development of the common market.