Gibraltar Government Initiates Legal Action Against European Commission

Amanda Banks, Tax-News.com, London

22 August 2001

In a bid to protect the future of its finance centre, the Gibraltar government is taking legal action against the European Commission. A statement released this week has explained the government's intention to 'overturn the decisions made by the European Commission challenging the legality of Gibraltar's exempt and qualifying company legislation under European Union state aid rules.'

Last month the European Commission launched an investigation to establish whether Gibraltar's tax laws are in breach of the 'state aid' rules of the European Union. But the government argues that the essence of the exempt company legislation is that it grants tax exemption to companies that do business outside of Gibraltar and is not available to companies that do business inside Gibraltar.

The Gibraltar government's case alleges that the Commission's decisions are wrong in law, infringe Gibraltar's rights to a defence and are contrary to the EU legal principles of proportionality, legal certainty and legitimate expectations.

Chief Minister Peter Caruana explained the seriousness of the finance centre's dilemma: 'The tax exempt company and the qualifying status company are pillars of the finance centre and therefore of our economy. The finance centre employs thousands of people directly and indirectly and is therefore of crucial importance to Gibraltar's economy. The EU Commission's decision represents a very serious challenge for our economy.'

'The government is legally advised that the Commission's decisions are wrong in law and have been taken in breach of several applicable procedural rules and legal principles,' continued Mr Caruana. 'It is essential to leave no stone unturned in challenging these decisions, given their severe consequences for our economy, for the jobs of many hundreds of Gibraltarians and for government revenue and therefore for our collective standard of living as a community. The government remains completely committed to the Finance Centre and to ensure its continuing and competitive prosperity and is in close consultation with the Finance Centre Council on this matter.'

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