EU Commission May Reject Gibraltar's Tax Reforms

by Robert Lee, Tax-News.com, London

19 February 2004

According to a report from Iberia News, a Gibraltar government spokesman has indicated that the European Commission is about to announce its rejection of the jurisdiction’s proposed tax reforms on the grounds that they breach EU state aid rules.

The reform would abolish taxation of company profits and replace it with a payroll tax (a fixed tax per employee) and a business property occupation tax. In addition, two sectors, financial services and utilities, would be subject to "top up" taxes on their profits at a rate of 8% and 35% respectively.

However, Gibraltar's links with the UK have led the Commission to conclude that the new tax system may constitute unfair state aid to “a part of the UK” and it has been investigating the issue ever since.

The spokesman confirmed that "any such conclusion would amount to a decision that, according to the Commission, Gibraltar is not entitled to have a different tax system to the UK". He added that this would be an “unsustainable proposition” for Gibraltar.

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