Postscript - Gibraltar faces legal battle over tax laws.

(From Post Magazine)

Byline: Stephanie Denton, in Gibraltar.

Gibraltar Chief Minister Peter Caruana this week claimed he is confident the territory will continue to attract UK insurance companies with its favourable tax environment for the foreseeable future.

This came as Gibraltar and the UK launched separate legal actions in the European Court of Justice, in reaction to the European Commission's decision to reject Gibraltar's tax proposals on the grounds Gibraltar is a region of the UK and it would be discriminating to have different tax regimes.

Gibraltar has attracted several insurance companies in recent years due to its favourable fiscal environment, which is exempt from value-added tax, capital gains tax and wealth tax.

However, in 2001 Gibraltar, along with several other offshore finance centres, was forced to either enter into a political commitment to address the principles of information, transparency and non-discriminatory practices, or be blacklisted. These factors were labelled as harmful tax practices by the Organisation for Economic Co-operation and Development.

Gibraltar's proposed reforms were to abolish the taxation of company profits, replacing it with a payroll tax and a business property occupation tax. In addition, financial services and utilities would be subject to top-up taxes on their profits, at a rate of 8% and 35%, respectively.