Wednesday, July 27, 2005

Channel Islands call on UK “to force” Gibraltar into tax compliance

EU Directive on Taxation of Savings * Gib at centre of row

The Isle of Man has threatened to suspend retention tax or exchange of information on UK residents’ accounts held in the jurisdiction unless Gibraltar is brought within the ambit of the European Savings Directive, according to UK press reports.

It emerged earlier this month that the Directive, does not currently apply between Gibraltar and UK as they are not separate member states of the EU, a revelation which reportedly “caused outrage” in the offshore centres of Jersey and Guernsey as well as the Isle of Man.

Malcolm Couch IOM Tax Assessor: Gibraltar has the capacity to completely derail the savings directive
“Gibraltar has the capacity to completely derail the savings directive,” Isle of Man’s tax assessor Malcolm Couch remarked, according to the Isle of Man Online. “If the UK don’t do something about Gibraltar, they will quite openly be creating a tax haven within the EU, which is against everything the directive stands for,” he added.

Mr Couch suggested that the authorities in Gibraltar are actively using the situation to attract new funds, commenting that:

“They are playing a long game - not being particularly helpful to the UK in closing the gap.

If the UK government can’t sort this and we can’t get satisfaction, we will suspend the UK financial agreement,” Mr Crouch warned.

At a meeting of the Crown dependencies next week, the Guernsey government intends to call on the UK to force Gibraltar into compliance with the Directive as soon as possible.

“That is the date when the directive could live or die,” said Mr Couch.

Guernsey and Jersey may suspend tax deal over Gibraltar

Meanwhile Guernsey could this week also suspend the tax agreement with UK that has been in force only a month according to a report published in The Guernsey Press and Star. Jersey has already said that if the problem is not fixed by the end of the month, then it will suspend the agreement.

The article states that new fiscal arrangements were brought in across much of the international community on July 1 “when around 40 jurisdictions agreed to implement the long-awaited” and what it describes as the “highly controversial EU savings tax directive.”

But Guernsey Chief Minister Laurie Morgan revealed just days before it came into action that the island was considering suspending its bilateral agreement after “a last-minute problem occurred involving Gibraltar and the UK.”

This, says the newspaper, left a gap in the directive’s coverage and “led leading finance players to warn that investors in Guernsey could switch to Gibraltar.”

The Star says:

“At the time, Deputy Morgan was hopeful that UK would bring a quick resolution to the problem. But now, with the solution still outstanding, he is warning that suspension is a real possibility.

The Policy Council were expected to discuss the issue this week. Deputy Morgan will then travel to the Isle of Man for the annual inter-island meeting of the three Crown Dependencies.”

Deputy Morgan added:

“We have been very supportive of the UK Government while ensuring we do not damage Guernsey’s interests, but now we are in danger, if we have to suspend, of being made to look like the bad guys.

I am reluctant to use the weapon because, politics being what it is, some in the UK see this as the islands bringing the directive to a halt, especially if others followed us and use it for other motives when we all believe in a level playing field.”

Related Article:

22 July 2005 - Guernsey considers Euro Tax opt out

21 July 2005 - Gibraltar accused of taking advantage of loophole

04 July 2005 - Channel Island fury over Gibraltar tax ‘perk’

02 July 2005 - UK and Gibraltar Government seek deal on witholding tax


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