Unfavourable Tax Decision Would Be Devastating For Gibraltar, Warns Chief Minister

by Jason Gorringe, Tax-News.com, London

10 January 2005

The Chief Minister of Gibraltar, Peter Caruana, has warned that the jurisdiction’s economy could be devastated if the European Union carries through its threat to abolish the exempt companies tax regime and force the Rock to adopt UK tax rates.

In his New Year address, Caruana spoke of the difficult negotiations that the government has been conducting with the EU for the continuation of the exempt companies regime while the European Court decides the future of rejected tax reform proposals.

However, Caruana warned that by far the biggest threat came from the European Commission’s “misconceived” view that Gibraltar effectively constitutes part of the UK for tax purposes, and must therefore adopt UK taxes.

“This last issue is absolutely crucial to Gibraltar’s future economic and therefore social and political success,” Caruana warned.

“To speak of exaggerating the impact of this issue (as the GSLP Opposition has recently done) suggests, at best, a total lack of understanding of the issues and their consequences and implications for Gibraltar,” he added.

Nevertheless, Caruana went on to state that there is some cause for optimism after the government struck a deal with the EU in December, which is likely to be ratified by the EU Commission in the coming weeks.

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