On the 15 November 2011, the final judgement of the European Court of Justice on the matter of the Government of Gibraltar’s tax reform proposals was made available. The Court decided that the proposed tax regime breached EU State Aid Rules (the issue of ‘material selectivity’) but did not rule on the key issue of ‘regional selectivity’ on the basis that it wasn’t necessary or relevant to consider this issue, as the proposals already failed to meet the ‘regional selectivity’ criteria.
This ruling has no impact on Gibraltar’s current tax status, given that the proposed tax regime over which the Court ruled, which was put forward by the Government of Gibraltar in 2002, was never enacted. Instead the Government introduced an alternative tax system with effect from 1 January 2011, which is not the subject of a court case.
The Court has not ruled on the ‘regional selectivity’ argument, which concerns the ability of the Government of Gibraltar to implement a different tax system to that used in the United Kingdom. Several rulings currently exist in this regard, which strongly favour Gibraltar’s ability to establish its own tax regime.
Further information in relation to this case can be found in the Government of Gibraltar’s own press release on the matter:
GoG press release 339-2011.pdf
Gibraltar can therefore continue to apply its own tax laws.