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Gibraltar accuses EU's Almunia of "Spanish Bias"

Source: Bloomberg - Wed 1st Oct 2014
Gibraltar accuses EU's Almunia of 'Spanish Bias'

Gibraltar accused Joaquin Almunia, the EU's competition chief, of Spanish bias after he opened a probe into corporate tax deals in the territory.

"Outgoing Spanish commissioner Almunia has acted, not unsurprisingly, in the national interests of Spain and not objectively," Gibraltar's government said in an e-mailed statement.

The government's response followed Almunia's announcement that the EU is examining 165 advance tax accords for companies approved by Gibraltar authorities between 2011 and August 2013. The EU inquiry comes amid a global crackdown on corporate tax-avoidance as governments struggle to increase revenue and reduce deficits.

Almunia, a former PSOE candidate for Spanish PM, said today that he couldn't rule out more investigations of tax breaks that gave companies an unfair advantage. The EU released details yesterday of separate probes including Ireland's relationship with Apple Inc.

"My decisions, whether final or intermediate, are exclusively based on an analysis of compliance with EU rules and enforcement frameworks," Almunia said in an e-mailed response to the Gibraltar statement.

Gibraltar said it had "very little confidence in the work of EU institutions where Spanish nationals can influence the outcome of matters affecting" the territory and the EU decision was based on "basic errors of fact."

It said it would cooperate with EU officials after Almunia leaves office at the end of October.

Disputed Sovereignty

Gibraltar, on the southern tip of the Iberian peninsula, falls under EU jurisdiction because of its ties to the U.K. Spain disputes U.K. sovereignty over the territory and has protested at tobacco smuggling and claimed fishing rights in the area. The EU said last year it opened a probe into Gibraltar's tax deals following a complaint from Spain.

EU regulators are also probing tax arrangements for Apple in Ireland, Starbucks Corp. in the Netherlands and Fiat Finance& Trade in Luxembourg.

The commission has said tax avoidance and evasion in the EU cost about 1 trillion euros a year.

Gibraltar's new corporate tax policies enable companies to request tax rulings providing clarity on whether certain income should be taxed in the British Overseas Territory, the EU said.

"It appears that the Gibraltar tax authorities grant formal tax rulings without performing an adequate evaluation of whether the companies' income has been accrued in or derived from outside Gibraltar and therefore is exempted from taxation in Gibraltar," the EU said in an e-mailed statement.

Probe

EU's competition arm has set up a task-force to probe tax ruling practices across the bloc. Officials are looking into Microsoft Corp, the world's biggest software maker, Amazon.com Inc., and McDonald's Corp.'s taxes in Luxembourg, people with knowledge of the investigation said in July. The commission's inquiry extends to four other countries - the U.K., Belgium, Cyprus and Malta, the EU said in June.

Tax policy is one of the most sensitive political issues in the 28-nation bloc. Changes to EU tax rules require unanimous approval among governments, rendering major changes almost impossible. Even the most enthusiastic members of the EU have clung to their right to set corporate rates.

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