Gibraltar Government Plans 'Radical Reform' Of Company Tax If Court Action Against EU Fails

by Mandy Robinson, Tax-News.com, London

27 August 2001

According to reports from the Panorama online news service, the Gibraltar government has announced that it will radically reform its corporate taxation system if it loses the court action it brought against the European Commission last week to challenge the Commission's allegation that Gibraltar's tax laws are in breach of the state aid rules of the European Union.

The government has argued 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 says that the Commission's accusations 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.

But a government spokesman informed Panorama that if the government lost the interim court case, scheduled for next month, it would 'immediately rush through a radical reform of company tax to minimise as far as possible the immediate disruption to the finance centre and save as much of it as possible and the jobs that it provides,' and in the meanwhile suspend the current legislation relating to exempt and qualifying company regimes.

The European Commission's investigation could spell disaster for the future of the Gibraltar Finance Centre, Chief Minister Peter Caruana explained: '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.'

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