The Official Journal of the European Union yesterday published details of an application by the Kingdom of Spain to annul the decision of the European Commission dated 19 December 2018 in relation to Gibraltar’s Income Tax regime. This represents yet another attack by a Spanish Government on one of the pillars of our economic model, namely our tax regime, and shows that whatever agreements are reached with a Spanish Government, of whatever political persuasion, they simply cannot be trusted to set aside their obsessive attempts to damage our economy and our way of life.

It will be recalled that on 1 June 2012, the European Commission received a complaint from the then Spanish Government concerning the Income Tax Act 2010 and on 16 October 2013 the Commission initiated a formal investigation procedure to verify whether our Income Tax regime breached European Union State aid rules.

While the European Commission concluded that a handful of Tax Rulings issued by the Commissioner of Income Tax in 2012/2013 together with a royalty income exemption that existed in our law at the time, selectively favoured certain companies, it rejected much wider arguments by the Spanish Government on the Income Tax Act. To that extent, therefore, the Commission Decision of 19 December 2018 was good news for Gibraltar.

In this new Annulment Application, the Spanish Government seek to argue that “the Commission possessed data and information that showed the existence of territorially selective State aid, which should have led it to have doubts as to the selective scope of the aid. By confining itself to the criterion of material selectivity, the Commission came to incorrect conclusions, given that there is or may be more aid than that actually identified in the contested decision.”

Daniel Feetham QC MP said:

“From a legal standpoint this new Annulment Application would appear to be based on a regional selectivity argument that was roundly dismissed by the General Court in 2008 when the GSD was in Government. It is, therefore, a pretty hopeless argument.  The intention,however, is clear.  Spain is attempting to resuscitate arguments with serious constitutional implications for Gibraltar as a separate jurisdiction from the United Kingdom and with the aim of ultimately affecting our ability to have a different tax regime to the United Kingdom.  They may try and dress it up slightly differently but that is what this appears to be about. In other words, that the Income Tax Act 2010 selectively favours undertakings in Gibraltar as compared with the rest of the UK (Gibraltar being treated as part of the UK for most EU law purposes).

Whatever our view on the merits of the legal arguments, it does, however, demonstrate that Spanish Prime Ministers of different political persuasions may come and go from La Moncloa but none of them appear to be able to resist the temptation of interfering negatively in our affairs.  It also shows that we simply cannot trust the Spanish Government when it comes to agreements we enter with them.”