MercoPress. South Atlantic News Agency

EU Tax legislation divides Gibraltar and Channel islands

Isle of Man has threatened to suspend retention tax or exchange of information on United Kingdom 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.

"Gibraltar has the capacity to completely derail the savings directive," Isle of Man's tax assessor Malcolm Crouch remarked, according to the Isle of Man Online.

"If the UK doesn'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 Crouch 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 Crouch. 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.