Caruana Discusses Tax Issues In Brussels

by Jason Gorringe, Tax-News.com, London

16 July 2004

Gibraltar’s Chief Minister, Peter Caruana, travelled to Brussels this week where he held meetings with the European Commission regarding arrangements affecting Gibraltar's' tax-exempt companies, pending the European Court of Justice’s adjudication on the colony's tax reform proposals.

Under the proposed reforms, the existing 35% corporate tax rate will be abolished and replaced with a payroll tax and a business property occupation tax - both capped at 15% of profits, while tax-exempt company forms will be abolished.

However, the reforms have been blocked by the European Commission, which decided earlier this year that the proposals would be illegal under EU rules.

The Commission has effectively suggested that for taxation purposes, Gibraltar should be considered part of the United Kingdom, and that the tax measures would therefore give companies domiciled in Gibraltar an unfair advantage over their UK counterparts.

Last month, Gibraltar, along with the UK, launched a legal challenge to the Commission’s decision on the basis that the jurisdiction’s autonomy in matters of taxation pre-dates the UK’s (and Gibraltar’s) accession to the European Community in 1972.

“It is the position of both the United Kingdom Government and the Gibraltar Government that the Gibraltar legislature has full power to adopt legislation in the field of taxation,” the Chief Minster’s Office stated at the time.

“Both Governments believe that the Commission’s decision misapplies the principle of regional selectivity, ignores the factual realities and the historical and constitutional relationship between the United Kingdom and Gibraltar and cannot therefore be accepted,” the statement added.

The Chief Minister was accompanied on his latest trip by Chief Secretary Ernest Montado and Private Secretary John Reyes.

Recommended