Friday, July 8, 2011

Unfair Taxation.

The effect of the Double Taxation Convention France/UK
The example below illustrates the gross unfairness of the imposition of the Double Taxation Convention on many British expatriates in France.
Mr. and Mrs Smith are OAPs resident in France.
Let us suppose that they jointly have a global income of 32000 euros, all of it originating from the UK.
It originates from two sources. A Government service pension, and the joint Old Age Pensions (full for Mr. Smith, and Mrs. Smith has a reduced pension as a wife on her husband’s contributions).
The Government pension is £17715/year and the joint OAPs are £10125/year.
In Euros this is 20362 € and 11638€ respectively
These together are £27840 which at 1€= £0.87 is 32000 euros

The £17715 is taxable in the UK. Tax claimed is £820
The 11638 euros of OAP are taxable in France. Tax claimed on this is zero.
A home help is employed which costs 2000 euros/year (less than three hours/week). This, in France, attracts a 50% tax abatement of 1000 euros.

If the whole 32000€ were taxable in France, then only 354€ (£307) tax would be payable.
As it is Mr. Smith is taxed £820 in the UK.
It is patently clear that the DTC is discriminatory against Mr. Smith.
It is clear that Mr. Smith pays more tax than a French National in exactly the same circumstances.
It is clear that Article 25 of the Double Taxation Treaty is infringed.
Article 25 states that no-one should suffer a greater tax load compared with a French National as a result of the operation of the Double Taxation Convention.
Article 26 requires that the HMRC should take action if article 25 is infringed.  They refuse to do so!

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