Company Incorporations Low As A Result Of Tax Uncertainty In Gibraltar

by Ulrika Lomas, Tax-News.com, Brussels

07 May 2002

Following the ruling of the European Court of Justice last Tuesday, which supported Gibraltar's appeal and annulled the European Commission's claim that 'exempt' and 'qualified' companies amount to illegal state aid, the Labour Group's Nigel Feetham has revealed that the uncertainty of the the past year has resulted in lower company incorporations than have been seen for many years.

The European Court ruled that the EC had committed an error by classifying tax exempt companies as new aid, and announced that the action with respect to qualified companies was unfounded.

The likely outcome of this, according to the Labour Group, is that the jurisdiction's financial centre will be permitted to: 'negotiate a phaseout for tax exempt companies if, as is likely, the Commission still considers the 'existing aid' no longer to be compatible with the EC Treaty.' Some changes are also expected with regard to qualifying companies.

While Mr Feetham commented last week that the Labour Group welcomed the decision, he said that investor confidence had been seriously undermined over the past eight months by the ongoing investigation and uncertainty over the timing of the Gibraltar government's planned restructure of the tax system.

In the light of this, he argued: 'We should now expect the EC Commission to face up to its own responsibilities. It is the very same Commission that commenced these State Aid investigations against Gibraltar's tax structures that has failed to take any action against Spain's numerous infractions in respect of Gibraltar.'

He added that: 'Not only do we have to contend with the Commission appearing to take sides with Spain on matters that affect Gibraltar, but Spain also taking sides with the Commission to cause irreparable damage to our economy. That cannot be right.'

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