Gibraltar Confident Of Tax Court Victory

by Amanda Banks, Tax-News.com, London

16 November 2010

The Gibraltar government has said that it is confident of victory in the appeal heard by the Grand Chamber of the European Court of Justice on November 16, brought by Spain in a challenge to Gibraltar's fiscal autonomy from the UK's tax regime.

In the European Court of Justice's prior ruling, arguments surrounding Gibraltar's tax system and its autonomy were questioned with the European Commission seeking determination, based on EU state aid principals, how rules regarding regional selectivity and material selectivity could be applied to Gibraltar's territory. The Gibraltar government won in the lower court on both grounds.

An appeal by the European Commission, on the grounds of material selectivity, was then dropped as Gibraltar made required changes to its tax regime.

Spain however, which has intervened in the case, appealed the lower court’s ruling on the regional selectivity ground. The Commission did not appeal this ground. Spain's argument on regional selectivity seeks to challenge Gibraltar’s right to have a tax system different from that of the UK’s.

The Gibraltar government, in a statement prior to the hearing, said that “while the consequences of defeat on this ground would be severe for Gibraltar, the government is confident of success.”

The prior case, which confirmed Gibraltar's fiscal autonomy, was crucial in that it has permitted the government to revise the territory's tax regime to one that from 2011 will impose a competitive tax rate of 10% on corporates - whether onshore or offshore, and a 20% tax rate on utility companies.

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