Regional Selectivity

The Government notes the action brought by the Spanish Government on 10 April 2019 in Case T-241/19. In this action, Spain seeks the annulment of the Commission decision of 19 December 2018 in which the Commission found that certain discreet aspects of the Income Tax Act 2010 constituted state aid. 

The new action brought by Spain seeks to reopen an issue that has already been addressed, and comprehensively rejected, by the European General Court in a previous case, namely, the issue of regional selectivity. In short, that principle would require Gibraltar to operate the same tax system (and tax rates) as the United Kingdom.

The Government is confident that the European General Court will reject Spain’s arguments, just as that same court rejected those same arguments in 2008. Indeed, the principle of regional selectivity was first raised by the European Commission against Gibraltar and the European Commission no longer believes in it as is evidenced by the fact that it has rejected it in the context of this new investigation.

Commenting on this development, the Chief Minister, Mr Fabian Picardo has stated: “We regret the initiative taken by the Spanish Government to challenge the Commission’s decision for failing to make a finding of regional selectivity against Gibraltar. The European Commission’s decision is clear that the principle of regional selectivity does not apply to Gibraltar.

"Indeed, the Commission has abandoned its original position and has adopted in full the General Court’s reasoning rejecting in robust terms any idea that regional selectivity could apply to Gibraltar. The Spanish action is doomed to fail. Why Spain has thought it necessary to bring such an action is obviously a matter for them. We regret it.”