The recent ruling by the European Court of Justice in the Gibraltar tax case has put an end to months of damaging uncertainty in the Rock’s financial sector.
The decision favoured Gibraltar and set the stage for a concerted drive to attract new business and consolidate the Rock’s position as a reputable finance centre within the European Union.
The court dismissed the European Commission’s argument that Gibraltar did not have the right to operate a tax system that was separate and different to the one in place in the UK.

Gibraltar’s unique taxation system has enabled the growth of the finance sector as a key driver in the economy, one that stimulates other areas of business and generates thousands of jobs and vital revenue.
Had the court ruled in favour of the European Commission, Gibraltar would have been forced to implement the UK’s company tax system and rates, which are sharply higher. That would have prompted most if not all of the finance centre and gambling companies to leave Gibraltar in search of more favourable jurisdictions.
In turn, that would have
resulted in thousands of job losses and a huge fall in government revenue, with a knock-on impact on public sector investment and employment.
In short, it would have plunged Gibraltar into crisis.
“This would have represented a massive political, economic and social blow for Gibraltar,” said Chief Minister Peter Caruana.
The Rock’s unique tax system “has been at the very core of our ability as a people, during the last 50 years, to create a successful economy that in turn has enabled us to prosper socially and, most importantly, politically in the face of external challenges to our political rights, wishes and aspirations as a people,” he said.
“Failure to win would have very severely undermined and disrupted all of these things.”
The implications of the European Commission’s challenge, had it succeeded, ranked “up there” with the recent threat to our sovereignty and political rights as a people.
“We are [now] able to remain masters of our own destiny and architects and builders of our own economic, social and political prospects,” Mr Caruana added.

MOVING AHEAD
The ECJ’s ruling was widely welcomed by politicians from across Gibraltar’s political spectrum and by finance
centre practitioners.
The decision came after months of uncertainty about Gibraltar’s future corporate taxation regime after 2010.
Without a clear picture of what to expect after that date, many companies and investors were wary of using the Rock to structure their businesses.
The GSLP/Liberal opposition it was vital now for the Gibraltar Government to move ahead swiftly with the implementation of a new corporate tax regime. “Winning this case was long overdue, as is the work the government now needs to do to provide the new corporate tax system the industry requires and which should have been ready already,” said the Opposition’s finance spokesman Fabian Picardo when the ruling was announced last month.
He added: “Winning this case is important, but the hard work of getting a new, efficient and advantageous tax system in place has not yet been completed.”
The Gibraltar Government will now move ahead with a new system that will implement a flat corporate tax rate of 10%.
The exact timescale for implementation has not been revealed yet but the details of the taxation framework will likely be finalised and published during the course of this year.
Companies currently enjoying tax-exempt status will want that to continue until that system – which was ruled incompatible with EU state aid law – is phased out in 2010. Other companies- including many local ones – currently paying 27% corporate tax will want the new 10% system phased in as soon as possible.
In the wake of the ECJ ruling, executives in the finance centre were bullish about Gibraltar’s future prospects in this sector.
“Notwithstanding the uncertainties over the last few years, Gibraltar’s financial services sector has continued to grow and develop,” said Emilio Gomez, chairman of the Finance Centre Council.
“This is indicative of the other non-tax benefits that Gibraltar has to offer, including our robust regulatory regime.”
“We now have the opportunity to take our growth and development to a higher level by the introduction, as soon as possible, of the corporate tax reforms proposed by the government.”