WRITTEN QUESTION E-3487/02

by Charles Tannock (PPE-DE) to the Commission

(9 December 2002)

Subject: Gibraltar's Tax Regime

Gibraltar, like the Republic of Ireland and other Member States, has used low corporation tax as a way of attracting business to the territory. There are reports that Commissioner Monti is investigating the possibility that these lower rates of tax constitute state aid.

Are these reports accurate, and, if so, does the Commission accept that the lower rates of taxation are offered equally to corporations from all EU Member States, and that Gibraltar's tax regime is, therefore, entirely non-discriminatory as between Member States? Does the Commission have evidence that Gibraltarian companies are privileged in the way that, say, the French Electricity utility Electricité de France appears to be?

Can the Commission confirm that it does not regard lower rates of non-discriminatory corporation tax as a form of state aid, and that any moves towards tax harmonisation require unanimity in the Council of Ministers under the existing European Treaties?

Does the Commission accept that it has an obligation to respect the provisions of Article 12 of the Consolidated Treaty Establishing the European Community which prevent discrimination on grounds of nationality? Does the Commission also accept that for the Commission to produce a Directive, such as that pertaining to the European Single Sky, excluding a part of the European Community which does not wish to be excluded, constitutes a violation of the European Treaties which can be brought before the European Court of Justice?

Answer given by Mr Monti on behalf of the Commission

(27 January 2003)

The Commission can confirm that it is investigating various aspects of the corporation tax regime in Gibraltar. On 11 July 2001, it opened formal State aid investigations into Gibraltar's exempt companies and qualifying companies(1). Following the annulment, on procedural grounds, of its Decision on exempt companies(2), the Commission proposed to the United Kingdom on 27 November 2002 the phasing out of the exempt company regime, by the end of 2005 at the latest(3). On 16 October 2002, the Commission opened a formal State aid investigation into Gibraltar's proposed reform of its company taxation laws(4). The Commission has not focussed on any alleged discrimination between Member States in any of these investigations, nor has any reference been made to Electricité de France.

In order for any measure, including lower rates of corporation tax, to fall within the scope of the State aid rules, it must satisfy the four criteria set out in Article 87(1) of the EC Treaty. The measure must confer an advantage on its beneficiaries; the measure must be financed through State resources; the advantage must be selective; and, the measure must distort, or threaten to distort trade and competition between Member States.

The EC Treaty establishes, in Articles 94 and 95, that harmonisation of rates of corporate taxation between Member States requires unanimity in the Council of Ministers.

The legislative proposals of the Commission(5) on the creation of the Single European Sky do not contain any exclusion clause for Gibraltar.

(1) OJ C 26, 30.1.2002.

(2) Case T-195/01, Government of Gibraltar v Commission, ECR [2002] p. II 2309.

(3) See Commission press release IP/02/1748.

(4) OJ C 300, 4.12.2002.

(5) OJ C 362 E, 18.12.2001 and OJ C 103 E, 30.4.2002.