No Word From EU Commission On Gibraltar Business Tax Reforms

by Jason Gorringe, Tax-News.com, London

26 September 2003

On his return from talks in London and Brussels ahead of the Inter-Governmental Conference negotiations on the European Constitution, Gibraltar's Chief Minister Peter Caruana revealed that the Rock's tax reform proposals will have to remain on hold whilst the Commission continues to examine various technical issues.

Speaking to the Gibraltar Chronicle, Mr Caruana revealed that he urged officials to come to a swift conclusion on their technical assessment to restore some certainty in the jurisdiction's market place. However, the matter continues to be bogged down in the 'regional selectivity' debate that prompted the EU Commission to block the proposed tax reforms in the first place.

The reform would abolish taxation of company profits and replace it with a payroll tax (a fixed tax per employee) and a business property occupation tax. In addition, two sectors, financial services and utilities, would be subject to "top up" taxes on their profits at a rate of 8% and 35% respectively. However, Gibrlatar's links with the UK led the Commission to conclude that the new tax system may constitute unfair state aid to 'a part of the UK' and have been investigating the issue ever since.

Naturally, the Gibraltar government has argued that it is not a 'region' of a member state so the rule does not apply, though at present there appears little indication when the Commission will present its view on the tax reforms.

Meanwhile, Gibraltar has been consulting with the UK government concerning issues that may arise in the IGC in Italy next month, though the jurisdiction cannot directly participate in the proceedings.

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