The European Commission has begun legal action against the Irish Government over its failure to exempt cross-border motorists from paying Vehicle Registration Tax.
It follows a petition taken to Brussels by Irish motorists who work or study in the North and claim that VRT interferes with their right to freedom of movement.
Since the tax was imposed in 1992, thousands of people living in border counties have had their UK-registered cars seized by revenue officials in the South.
Donegal resident Ryan Stewart, from the campaign to abolish VRT, said: "Up until now, the Government has been able to operate any tax as a national tax and it's been outside of the remit of the EC to come down against them…
"Now, our position has been accepted...It's all down to freedom of movement."