Spain Uses Gibraltar Card To Wreck OECD Compromise

by Ulrika Lomas, Tax-News.com, Brussels

05 July 2001

Spain is continuing to use the Gibraltar issue to block agreement at the OECD over the continuation of its 'harmful tax competition' initiative.

Last week the OECD's Fiscal Affairs Committee blocked out the shape of a compromise which would allow the initiative to continue with a narrowed focus on exchange of information after the US objected to the other two main planks of the initiative dealing with tax rates and discriminatory practices. But Spain, which objects to British ownership of Gibraltar under a 200-year-old treaty, spotted an opportunity to forward its Gibraltarian agenda by demanding guarantees that the Rock, as it's known, will reform its low-tax regime.

Spain's Ambassador to the Organization for Economic Cooperation and Development Elena Pisonero said she will veto the agreement, which among other things pushes back to November this month's sanctions deadline for
35 tax havens to end "harmful'' tax practices, unless there are guarantees that Gibraltar, a U.K. colony, will respect the accord.

"For Spain the maximum guarantee is that Gibraltar is no longer treated as a tax haven but as a preferential tax regime and as such it would fall on the U.K. as the relevant authority to be responsible for eliminating harmful tax practices there,'' Pisonero said in a statement.

There's no chance that Britain, or for that matter Gibraltar, will agree to the Spanish demand, which will quite possibly have the effect of destroying the fragile agreement put together between Britain and Spain in Stockholm during the Swedish presidency to recommence talks over the constitutional future of Gibraltar.

The longer the OECD talks continue, the more probable it is that the compromise stitched together since the beginning of the year will founder. Switzerland and Luxembourg abstained from previous agreements setting the process in motion. Belgium and Portugal are also likely to abstain in a vote to adopt the new agreement.

The United Kingdom said the Spanish action didn't require a unilateral response from them. "It's not something specific for the U.K.," said a U.K. Treasury spokeswoman. "The OECD is discussing it with the Spanish. They are in the lead."

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