Gibraltar Opposition Criticises Government Over Late Consultation With Qualifying Companies

by Ulrika Lomas, Tax-News.com, Brussels

03 September 2001

As the future of Gibraltar's offshore finance centre hangs in the balance, the government have come under fire from the Liberal/Labour alliance for failing to consult sooner with Qualifying Companies regarding potential tax changes, according to a recent Panorama report.

The government has promised rapid and comprehensive reform of the corporate taxation system if its legal challenge against the European Union fails, and although it is the perilous status of the country's tax exempt companies which has attracted most of the attention recently, other low tax vehicles, such as the Qualifying Company, are also under threat.

The government has been consulting the relevant companies, who presently pay between 1% and 5% in tax, and comprise some 10% of the 1400 companies trading in Gibraltar, as to whether they are willing to remain if they are required to pay 12%. However, according to Panorama, the opposition parties have been fiercely critical of what they see as the government's failure to act soon enough on this issue, and have accused the ruling party of exarcerbating the crisis in the financial centre rather than easing it.

'Given that the government has stated that if they are unsuccessful in obtaining interim relief they may need to suspend the Qualifying Company regime in a few weeks time, it is extraordinary that this exercise is being carried out so late in the day and confirms the Opposition view that the government has not been dealing with this matter expeditiously enough,' the alliance was quoted as saying last week.

The original Qualifying Company legislation, which allows offshore organisations with a significant presence in Gibraltar to pay just enough tax there to escape anti-avoidance provisions, was passed by the House of Assembly, and approved by the UK, who were obviously satisfied that it did not conflict with EU rules at the time. However, Britain has recently made it very clear that it will not oppose the European Union on Gibraltar's behalf.

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