Thursday, July 28, 2005

Tax row with Crown Dependencies rages on

War of words over application of EU savings directive * Islands getting “over-excited,” says Gib Government

Gibraltar Government has declared that the Crown Dependencies (Isle of Man, Guernsey and Jersey), are getting “over-excited” as regards the local position in relation to the application of the European Tax Savings Directive.

In a statement issued yesterday, Convent Place said that remarks in the Channel Islands calling on Britain “to force Gibraltar” into complying with the tax directive “are based on lack of familiarity with the facts.”

Earlier this week the Chronicle sought a reaction from the Gibraltar Government to the discontent and hostile statements that were emerging from the islands. According to financial experts, there are fears in the Crown Dependencies about a potential flight of savings following a tax agreement with Britain, and these statements are aimed at discouraging would-be investors from relocating to Gibraltar.

For the Gibraltar Government implementation of the directive in question is “not a challenge or a difficult or controversial issue” for the finance centre.

Meanwhile Britain has been dragged into the row and yesterday a UK Treasury spokesman declared that the issue of forcing Gibraltar to comply with the directive “does not arise, as Gibraltar has already met and implemented all of its obligations.”

In answer to questions, the Treasury spokesman confirmed that there had been exchanges with the Gibraltar Government following the statements from the Crown Dependencies.

Gibraltar Government reacts to Channel Isles remarks

The Gibraltar Government yesterday issued the following statement:

“The Government of Gibraltar notes statements in the Channel Islands which refer to a “last minute problem” and “an initial difference of views between the UK and Gibraltar” in the implementation of the Taxation of Savings Directives between the UK and Gibraltar and demanding a “quick resolution to the problem”.

There have even been calls for UK to “force” Gibraltar to comply with the Directive.

These remarks are based on lack of familiarity with the facts. Gibraltar already is within the ambit of and complies with the Savings Directive.

There has been no “last minute problem”, nor any difference of views.

Nor, as has been said has “Gibraltar signed up to the Directive”.

The Directive applies, and has always applied to Gibraltar as of right and obligation because Gibraltar is an integral part of the EU.

However, as was stated jointly by the Gibraltar Government and the UK Government in a joint press statement issued by them on 1st July 2005, the Directive does not apply as between the UK and Gibraltar because we are not separate member states in relation to each other.

Nevertheless, as announced jointly on 1 July 2005 the two governments are in discussion to agree appropriate arrangements for exchange of information between them outside of the legal framework of the Directive, which does not apply between them.

The two Governments have jointly announced that they are working together with a view to agreeing such arrangements during the next few months.

Expectations by ill-informed third parties that this should happen by the end of this month are as inappropriate as they are unrealistic.

The Crown Dependencies appear to be getting over excited about this issue.

This is not a challenge or a difficult or controversial issue for Gibraltar or its finance centre, which is not orientated to or based on providing tax shelter to UK resident depositors affected by this Directive.

Gibraltar’s Finance Centre has developed well beyond a dependence on the sort of business that is jeopardised by this Directive.

We are happy to enter into appropriate exchange of information arrangements with the UK at its request which it has indeed made. Hence the discussions now taking place and the 1st July joint statement.”


Tax deal with UK not shelved yet

Meanwhile press reports in Guernsey said yesterday that the islands’ political leaders had agreed to give the UK until the end of the year “to plug a gap in the coverage of the EU savings tax directive.”

The EU savings tax directive dominated proceedings at the annual inter-islands meeting. A joint statement from the islands said:

“At a meeting in the Isle of Man yesterday, the Crown Dependencies decided not to suspend their bilateral agreements with the UK.

It was agreed to accept the UK Paymaster General’s commitment to conclude arrangements with Gibraltar so as to ensure a level playing field during the period of the UK’s presidency of the EU.

We will be keeping in direct contact with the UK and will be monitoring progress closely.

In view of the very firm promises we have obtained from the UK Paymaster General, we are assured that the gap with Gibraltar will be closed.

However, we have already made it clear to her that it is a point of principle for us that the UK must deliver on its commitment.”

The Guernsey press reports added:

“The gap in the directive’s coverage led leading finance players to warn that investors in Guernsey could switch to Gibraltar.

The expected quick resolution failed to materialise and Deputy Morgan (Guernsey's Chief Minister - Laurie Morgan) last week warned that suspension was a possibility.”


Related Articles & Links:

European Savings Directive

27 July 2005 - Guernsey decides not to shelve Tax deal with UK... yet!

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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