EU sues France over illegal tax breaks

The European Commission said Wednesday it would take France to an EU court for failing to revoke a tax loop-hole which it considers to be illegal state aid.

For nearly three years, Paris has ignored EU regulators' December 2003 ruling that found that France's exemption of takeovers of ailing companies from tax broke EU state aid rules.

Competition Commissioner Neelie Kroes said "The Commission intends to deal very strictly with member states that fail to implement its state aid decisions."

"This is crucial to ensure the credibility of policy in this field," she added.

In its original ruling, the commission ordered France to recover taxes would have been due without the loop-hole in order to restore fair competition.

However, since the decision, the commission has found that France had taken the first steps only apply the ruling and that no practical action had been taken to recover aid from recipients.