SW Tory MEPs express collective dismay as Court rejects Gibraltar tax code proposals - La Treizième Étoile: A blog on EU politics
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SW Tory MEPs express collective dismay as Court rejects Gibraltar tax code proposals

Wednesday, 16 November 2011
Conservative MEPs Giles Chichester, Ashley Fox and Julie Girling pictured with Gibraltar's Chief Minister Peter Caruana, second right (Photo: Ashley Fox MEP newsletter)Conservative MEPs Giles Chichester, Ashley Fox and Julie Girling have together expressed their disappointment at the European Court of Justice after it ruled yesterday (15 November) that proposed changes to Gibraltar's corporate tax code did in fact constitute unlawful state aid.

The changes as were proposed over a decade ago by Gibraltar’s Chief Minister Peter Caruana, sought to cap tax liability at 15% of profits compared with 35% at present, and in effect exempt offshore companies without a physical presence in Gibraltar since they tax business property occupation and payrolls.

The saga began in 2002 when the UK first informed the European Commission that Gibraltar was to introduce a new business-tax regime. After much inspection, the European Commission decided in 2004 that this regime violated the EU's internal-market rules - a decision that Gibraltar and the UK consequently appealed against.

After many years of contention, the European Court of First Instance ruled in favour of Gibraltar effectively giving it the jurisdiction licence to set its own tax rules. Back then, in its verdict, the Court said that although the UK is representative of Gibraltar, the Rock does, however, have fiscal autonomy from the UK, and therefore can introduce its own individual tax system.

This ruling thus prompted a second appeal, this time by the Commission and Spain, which claims Gibraltar as its territory, and now the European Court, based in Luxembourg, chose to back the position taken of the European Commission stating that under EU law Gibraltar is not entitled to have a tax regime different to the UK’s.

A tax system designed in such a way that offshore companies avoid taxation constitutes a state-aid scheme that is incompatible with the internal market,the Court wrote in a press release today.

In reaction, the three Conservative MEPs who represent Gibralar, issued a joint statement today stating: “We are dismayed that Gibraltarians' growing prosperity will be undermined by this attack on their right to set tax levels as they please. It is deeply regrettable that the European Court of Justice has chosen not to back people's freedoms.

"We know Gibraltarians well and while they are proudly British and loyal to the Crown, they are also very quick to assert their democratic independence, their right to self-determination and their right to set their own laws and taxes. Unfortunately the court has not vindicated those rights and has allowed Gibraltar to be victimised by the Commission," they said.

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