MercoPress. South Atlantic News Agency

Dire future for Gibraltar.

Dire future for Gibraltar if the European Union effectively ends the British Overseas Territory's tax haven status sheltering billions of pounds from European tax authorities, as anticipated in The Times Friday's edition.

The London newspaper indicated that after an investigation by the EU Competition Commissioner, Brussels is expected to declare that Gibraltar acted unlawfully in not notifying the Commission of tax concessions offered to offshore finance companies.

"Such a ruling could destroy the rock's attempts to set itself up as an offshore financial centre and land Britain, ultimately responsible, with a vast fine in back payments", writes Dominique Searle from Gibraltar, adding that this would affect 20% of its labour force.

Britain encouraged Gibraltar to develop an offshore financial industry after the closure of the British naval base which once accounted for 60% of the Rock's economy.EU Competition Commissioner says that Gibraltar should have notified the tax arrangements in 1998. If companies attracted to the Rock by a low-tax regime, have to pay back those benefits they will face ruin and consequently sue the Gibraltar government for misleading them.

The ruling could not have come at a worst moment since Britain is trying to resolve the longstanding three centuries dispute with Spain, and a second round of talks at Foreign Secretary level is scheduled in the coming weeks in Barcelona.

The Times further on says that "Gibraltar is trying to challenge the EU ruling by going to court, arguing at the European Court of Justice in Luxembourg that it would suffer irreparable damage if Brussels orders an immediate withdrawal of the companies operating in the Rock as well as ordering huge financial penalties, which would have to be paid within two months".

Allegedly if the ruling finally sanctions Gibraltar, "Britain recommended Brussels not to seek repayment of all tax concessions" since they would amount to ten years' worth of taxation revenue.

The Gibraltar government blames Spain for the situation and says it's part of the pressure that Madrid is putting, including refusal to provide new telephone lines and not allowing direct flights to Gibraltar.