Britain to phase out Gibraltar tax breaks: EU

The European Union executive on Friday welcomed Britain's decision to phase out by 2010 certain tax breaks offered by Gibraltar.

The European Union executive on Friday welcomed Britain's decision to phase out by 2010 certain tax breaks offered by Gibraltar.

HT Image

"The abolition of the Gibraltar Exempt Company Tax Regime is a further important step toward eliminating harmful tax practices that violate EC Treaty state aid rules," Competition Commissioner Neelie Kroes said in a statement.

The European Commission last month threatened Britain with court action if the government did not abolish Gibraltar's tax scheme within one month.

The EU executive, which polices state aid and competition in the 25-member bloc, had suspected the tax scheme was a form of illegal subsidy that distorted competition.

Under the regime, a firm registered in Gibraltar as an exempt company pays no income tax on its profits but instead pays only a fixed annual tax of between 225 pounds ($425.1) pounds and 300 pounds.

Gibraltar's tax breaks encourage thousands of foreign firms to invest in the UK colony and are the lifeblood of the local economy. The offshore centre offers investors an alternative to European low-tax centres such as Monaco or Luxembourg.

The Exempt Company Tax scheme, which was found unlawful by a group of EU experts, is enjoyed by around 8,500 offshore firms.