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Spain v Government of Gibraltar and United Kingdom hearing on tax next week

Spain will challenge Gibraltar’s right to institute a more lenient tax regime than the UK next week

Spain v Government of Gibraltar and United Kingdom hearing on tax next week

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Although “the consequences of defeat" in the European Court of Justice case "would be severe for Gibraltar, the government is confident of success”, the Gibraltar press office said in a statement.

Next week’s hearing comes after months of tension between Spain and Gibraltar that have involved charges of alleged “incursions” into Gibraltar waters by Spain, and a threat by the mayor of La Linea, the reportedly cash-strapped Spanish town bordering Gib, to introduce a tax on those crossing onto and off of the crowded, 6.5sq km (2.6sq mi) Gibraltar peninsula.

The tensions are rooted in a long-standing claim by Spain that The Rock, as Gibraltar is colloquially known, should be returned to Spanish sovereignty.

Last month Gibraltar, Spain and the UK agreed to resume an ongoing series of talks, and are currently involved in pre-talk preparations for a session scheduled to take place in Madrid later this year, a Gibraltar spokesman said today.

 ‘Joined hearing’

Tuesday’s scheduled “joined hearing” is referred to in part on the Court of Justice’s calendar as “Spain v Government of Gibraltar and United Kingdom”. The main case involves an appeal by the European Commission of a 2008 decision, which found in favour of Gibraltar, concerning Gibraltar’s tax system – specifically having to do with “State Aid principles of both regional selectivity and material selectivity”, according to the Gibraltar press office.

Gibraltar argues that the commission’s appeal, on the grounds of material selectivity, “no longer has any consequence” because “it relates to a tax scheme that Gibraltar has not pursued”. 

What has made the case the subject of discussion in Gibraltar (and coverage in the local Gibraltar Chronicle) has been Spain’s intervention in the matter. 

Spain’s argument in the case, which is different from that of the commission, is that the 2008 decision concerning Gibraltar’s tax structure had been flawed because it treats Gibraltar as “de facto…a new [EU] member state for the purposes of taxation”.

According to this argument, Gibraltar has never ceased to be a part of Britain since it was “ceded by the King of Spain to the British Crown” in 1713. Yet, Spain argues, last year’s judgement was “tantamount to treating Gibraltar as a member state” on its own, and thus entitled to certain financial advantages that would not ordinarily be accorded to a “tax haven”, which it argues that Gibraltar is.

“The judgement under appeal, in holding that no comparison can be made between business activity in Gibraltar and that in the United Kingdom, is in breach of the principles of the Organisation for Economic Cooperation and Development – according to which measures which may be general in Gibraltar may be harmful to OECD members, [including] the United Kingdom,” Spain contends, according to court documents found on the Court of Justice website.

N Díaz Abad and JM Rodríguez Cárcamo, who are described in court documents as “agents” representing Spain’s interests in court, could not be reached for comment.

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