The European Commission finds large corporations are in breach of EU laws with their Gibraltar tax arrangements.
In 2013, the European Commission first began investigating the tax arrangements in Gibraltar, particularly in relation to large corporations that benefit from corporate tax exemptions. By 2014, the investigation was widened to include 165 tax rulings that took place between 2011 and 2013.
This investigation was arranged as the European Commission became increasingly concerned that there was a disparity in tax rates and that some companies could not prove that they were paying the same tax rate as other companies in Gibraltar.
EU rules state that members of the European Union are not permitted to give preferential tax rates to certain companies. Doing so can cause a distortion of commercial competition. However, the European Commission has found that Gibraltar has offered selective tax benefits to certain organisations between 2011 and 2013. As a result, Gibraltar has been in breach of EU laws.
The Commissioner who is in charge of competition policy, Margrethe Vestager, has said that Gibraltar must not only remove the tax exemptions, which are illegal in the EU, but they must also recover any unpaid taxes. In a bid to improve the tax system, Gibraltar has refreshed its tax laws, streamlined the tax ruling process and has ensured tax laws in Gibraltar are in line with EU regulations.
The Commissioner stated: “Our investigation has found that Gibraltar tax arrangements accorded unfair and selective tax benefits to several multinational companies, through a corporate tax exemption scheme and through five tax rulings.”
Now that Gibraltar is abolishing the illegal tax rulings, they must now recoup the unpaid tax from the organisations that benefited from preferential treatment. It is estimated that the amount of tax that needs to be recovered is around €100 million.