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Azores tax case could have implications for Gibraltar
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In a ruling which could have repercussions for Gibraltar, the European Court said yesterday that the tax regime in the Azores Island is illegal.
In 1999 and 2000 the island, which is Portugese, set up lower corporate tax rates than the rest of Portugal. In 2002 the European Commission branded them illegal state aid and ordered their phasing out, a decision that Portugal appealed.
It will be recalled that Gibraltar's new corporate tax structure, was rejected by the European Commission on the grounds of both material and regional selectivity. The former means the actual contents of the measure itself and the latter posed the question as to whether Gibraltar could have a different business tax regime from the Member State UK in the first place. The United Kingdom was supporting Portugal in this case, no doubt fearing that the wrong decision could open a constitutional pandora's box in Gibraltar's case.
In a relevant section the ruling says that the Azores Islands do not have enough political and economic autonomy from Portugal to set tax rates that are different from those applied in the rest of the country.
It is well known that Gibraltar is not part of the United Kingdom, nor is it a region of the United Kingdom but is an independent jurisdiction with our own powers to set, raise and spend taxes. While the outcome of the case against the Commission over Gibraltar's planned new tax structure is awaited, it is known that the Government continues to have new rounds of consultations with the Finance Centre industry on the issue of low-tax versus no-tax.
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