Gibraltar Considers Legal Action Over Savings Tax Directive

by Jason Gorringe, Tax-News.com, London

01 July 2003

The Chief Minister of Gibraltar Peter Caruana has recently sought legal advice on whether the territory has a case against the UK and the European Union to block their attempts to impose the rules of the Savings Tax Directive on the jurisdiction.

The agreement, reached earlier this month, will compel the dependent territories of member states to begin exchanging information on the savings interest of EU residents from January 2005. This will mostly affect the territories linked to the UK and Holland in the Caribbean, but also extends to Gibraltar and the Channel Islands.

However, Caruana is keeping tight lipped on the outcome of this legal advice, and has refused to comment on whether Gibraltar will be joining forces with the other affected territories such as the British Virgin Islands, Anguilla and the Cayman Islands.

The Cayman Islands have already challenged the EU in the Court of First Instance over its right to impose the Savings Tax Directive, but a far from conclusive result seemed to muddy the waters still further.

Although the ECJ dismissed the Cayman Islands' application for the formation of a Commission Working Party on the issue of the Savings Tax Directive, the court said that the EU cannot impose an obligation on the territory to implement the proposed Directive on the Taxation of Savings Income. In addition, the court ruled that the UK was not legally required as a full member of the EU to impose the directive on the Cayman Islands.

The ECJ said that the question of whether the UK could constitutionally impose the Directive on the Cayman Islands via an Order In Council was something that depended on the exact arrangements between the UK and the Islands, and was outside the ECJ's remit.

A comprehensive report on the OECD, FATF and other 'offshore' initiatives, including the EU's Savings Tax Directive, is available in the Tax News Reports Shop at http://www.tax-news.com/reportshop