Court of Justice Rules Gibraltar Operators Should Pay Same Taxes as UK Counterparts

The Court of Justice of the EU rules that Gibraltar can't be exempt from the Point of Consumption tax, as they can only be regarded as the part of the UK.

The dispute between the UK and Gibraltar has been going on since 2014, when the United Kingdom had introduced the Point of Consumption tax, requiring all gambling operators offering services in the UK to pay a 15% tax on their gross revenues, regardless of where they are located.

Gibraltar, whose economy is primarily based on online gambling, appealed the decision before the UK court, which sent the case to the Court of Justice of the EU (CJEU). On Tuesday, the court reached its preliminary decision, and it seems that the Gibraltar Betting and Gaming Association (GBGA) won't be getting the exemption they were looking to obtain.

The UK and Gibraltar: One and the Same

The reason why the UK court decided to send this case to the Court of Justice was because they believed that, in the interest of a fair decision, it was first necessary to clearly define the position of Gibraltar in relation to the UK and the European Union.

Officially, Gibraltar is a colony of the British Crown, but it isn't part of the UK as such. However, CJEU ruled that, when regarded in the context of the EU, Gibraltar and the United Kingdom can only be observed as a single member state.

Although the decision is still not official, it indicates that Gibraltar will have to accept the Point of Consumption tax despite formally not being a part of the UK.

Future Prospects

Gibraltar entered this battle because online gambling represents a crucial source of income for the country, and they contribute 25% of the overall GDP of all overseas British territories. The new tax could have major adverse effects on Gibraltar's economy.

At the same time, the CJEU decision is interesting in the light of the upcoming Brexit negotiations. Gibraltar has every reason to stay inside the European Union, exactly due to the nature of the country's economy, and they have repeatedly expressed this stance. However, if they are treated as one with the UK, Gibraltar might not have a lot of say in the matter, which would seriously impact their plans for the future.