UK And Gibraltar Form Common Approach Towards Regional Selectivity Question

by Jason Gorringe, Tax-News.com, London

03 March 2004

Gibraltar’s Chief Minister Peter Caruana has stated that the United Kingdom government is “100% on-side” with the jurisdiction regarding the ‘regional selectivity’ debate that threatens to derail Gibraltar’s tax reform proposals.

"It is true that the policy of regional selectivity is also very politically challenging to the UK. So the UK is opposed to the process of regional selectivity for reasons of its own, as well as understanding that it makes the constitutional relationship between Gibraltar and the UK absolutely nonsensical if Gibraltar does not have the ability to do things differently to the UK in all areas of the economy,” stated Mr Caruana after conducting various ministerial meetings during his trip to London. “HMG is 100% on-side on this,” he noted.

The regional selectivity debate stems from Gibraltar's close links with the UK, which have led the European Commission to conclude that the new tax system may constitute unfair state aid to “a part of the UK,” prompting an investigation by the EU.

It has recently emerged that the Commission is likely to reject Gibraltar’s tax proposals, and the jurisdiction is now preparing for a lengthy court battle against such a decision, although it could take eighteen months following the Commission's decision before the European Court of Justice rules on the matter.

“We will have to work hard to make sure that the finance centre is not unduly destabilised during this interim period. That is where the government is going to focus its attention,” stressed the Chief Minister.

He added: “We looked at how litigation could best be pursued, and how the interim period between the decision and the litigation could best be managed to ensure that there is as little disruption as possible to the fluidity of finance centre business and as little damage done to the finance centre as possible.”

Recommended