15 February 2000

Judgments of the Court of Justice in Cases C-169/98 and C-34/98

Commission of the European Communities v French Republic


The Court considers that the application to frontier workers of the French legislation introducing the CSG and the CRDS is not in conformity with the principle of freedom of movement for workers

The CRDS (Contribution pour le Remboursement de la Dette Sociale, or Social Debt Repayment Contribution) was introduced by the French Republic in 1996. It is payable on the employment income or substitute income of natural persons domiciled in France for income tax assessment purposes. The assessment basis for the CRDS, the rate of which is 0.5%, includes, in particular, wages, retirement and invalidity pensions, unemployment allowances, professional fees and statutory family benefits. The proceeds of the CRDS go to a public body (the CADES) which is under the joint supervision of the Minister for the Economy and Finance and the Minister for Social Security; the CRDS is intended to discharge the deficits of the general social security scheme.

The CSG (Contribution Sociale Généralisée, or General Social Contribution) was introduced by the 1990 Finance Law. All natural persons domiciled in France for income tax assessment purposes are liable to pay this contribution, in particular on their employment income or substitute income. Its assessment basis was enlarged in 1996 so as to align it with the assessment basis for the CRDS. Its proceeds, which are collected by the institutions responsible for collecting contributions to the general social security scheme, are paid to the Caisse Nationale des Allocations Familiales (National Family Allowances Fund), the Fonds de Solidarité Vieillesse (Old-Age Solidarity Fund) and the compulsory sickness insurance schemes.

The European Commission asked the Court to declare that, by applying those two contributions to the employment income and substitute income of employed and self-employed persons resident in France but working in other Member States of the Community, the French Republic is infringing the Treaty and the Community rules relating to the application of social security schemes.

Those rules provide that the legislation of a single Member State is to apply for the purposes of social contributions. The workers concerned should only be required to pay the social charges of the Member State of employment on their income, since the legislation of that State alone is applicable to them as regards social security.

The Court points out that the decisive factor for the purposes of applying the Community rules is that there must be a link between the provision in question and the social security schemes. That link appeared to the Court to be sufficiently direct and relevant as regards both the CSG and the CRDS, in so far as those contributions are aimed specifically and directly at financing the French social security scheme. In the Court's view, the fact that payment of those contributions does not give entitlement to any benefit in return does not undermine that conclusion. The nature of the institutions responsible for collecting the contributions does not affect the finding, which is decisive, as to their final destination -the financing of the general French social security scheme.

The Court concludes, in both cases, that the contributions in question, although categorised as a fiscal charge by the French Republic, are in fact in the nature of a social levy. It points out that the fact that a worker is required to pay, in respect of the same earned income, social charges arising under the legislation of several States, although he can be an insured person only in respect of the legislation of one State, means that the worker must pay contributions twice over, contrary to the Community rules.

Lastly, the Court states that the French legislation discriminates against employed and self-employed persons resident in France but working in other Member States and gives rise to unequal treatment constituting an unjustifiable obstacle to the free movement of workers.

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