According to the Gibraltar Chronicle, the European Council of Finance Ministers has raised concerns over Gibraltar’s tax regime, in response to an objection filed with the Commission’s Competition Directorate in June by Spain.
The publication does not say what the concerns are, beyond that an un-named Gibraltar government source told it that “one aspect of [Gibraltar’s] 2010 Tax Act had been identified by the code committee as ‘harmful’".
However, the Chronicle added, “it is understood that only minor changes are required which do not affect the basic 10% corporate tax rate”.
The 2010 Tax Act established Gibraltar’s flat 10% corporate tax rate, which took effect on 1 Jan 2011, the day after the last of a handful of companies in the jurisdiction lost their fully tax-exempt status. The rate for most other businesses at that time was 22%.
Gibraltar government officials could not be reached for comment. Several, including chief minister Fabian Picardo and Gibraltar Finance Centre director James Tipping, are in London for a meeting of the British Overseas Territories Joint Ministerial Council.
With respect to Spain’s objections, the Chronicle noted that it "understands that Spain was in fact isolated in its position at yesterday’s meeting with [the] EU finance ministers, who accept the Gibraltar tax regime is intrinsically fair, [and who are] increasingly seeing Spain’s pressure on Gibraltar as disproportionate”.
Wider issues
Spain’s interest in Gibraltar’s tax rate pre-dates its current regime, and is seen as part of the wider issues Spain has about the jurisdiction, a UK overseas territory that Spain claims for its own.
As reported here in 2010, a lengthy battle over Gibraltar’s corporate tax regime led by Spain ultimately found its way to the European Court of Justice, after the European Commission and Spain appealed a 2008 ruling over a tax regime Gibraltar’s had proposed in 2002, but never implemented. The ECJ eventually ruled in favour of the European Commission and Spain on 15 Nov 2011, accepting their arguments that the regime would have constituted "a state aid scheme".
It was last year, on 19 Dec 2011, that ECOFIN at last gave the nod to the zero-10 tax regimes of Jersey and the Isle of Man, ending a saga that began in 2009, when a review of the zero-10 regimes of these two islands as well as that of Guernsey was first announced.
To read the Gibraltar Chronicle story, click here.
