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Double Taxation Agreement & Tax Treaty with Spain – 765/2019

By October 28, 2019 No Comments

Her Majesty’s Government of Gibraltar notes the statement from the GSD Opposition that welcomes the Double Taxation Agreement (DTA) concluded by the GSLP/Liberal Government with the United Kingdom.

The DTA with the UK will be an important instrument for citizens generally and for the financial services and online gaming sector in particular.

The continued criticisms of the GSD toward the international tax treaty with Spain are, however, entirely misconceived.  The Government has obtained the LEGAL opinion of Sir Peter Caruana QC in respect of the sovereignty aspects of the tax treaty.

Specifically, the Government asked Sir Peter to provide a written advice on ‘Whether the Tax Treaty contains any legal concessions on sovereignty.’

The legal advice provided by Sir Peter confirmed as follows:

Sovereignty

I am asked for my opinion on whether the Tax Treaty contains any legal concessions on sovereignty.

As the question correctly recognizes, sovereignty is a legal, not a political concept.[1] It implies that its legitimacy and authority can be established exclusively by reference to the legal system itself. It is the legal principle of supreme authority within a territory, free from another State’s intervention in the territory and immunity from the exercise of jurisdiction by another State. This includes the right and power to make (in this case, tax) laws and the competence to enforce them i.e. the exercise of jurisdiction to the exclusion of another State (hereinafter “Sovereignty”).

By virtue of our constitutional arrangement with the UK, sovereignty is exercised in Gibraltar primarily by the HMGOG and the Gibraltar Parliament (save such now very limited powers exercised by HE the Governor) and (in the context of external relations, defence and reserve powers) HM Government in the United Kingdom. So the sovereignty of Gibraltar is both horizontally and vertically divided (shared) in this way.

The term “sovereignty” is sometimes colloquially used to express purely political sentiments. This does not engage legal sovereignty. My opinion, as requested, is limited to matters of Sovereignty in its legal sense, and I express no view whatsoever (one way or the other) about the Tax Treaty from the perspective of political opinion, including whether the Treaty, or any part(s) of it, represents a good or balanced agreement for Gibraltar.

Every time a Government or country enters into an international agreement it is necessarily agreeing to do or omit to do something in the future or to do it in a particular, agreed way, thus curtailing (by agreement) its freedom of future action in the exercise of its sovereign jurisdiction, powers and rights in that respect. This does not of itself constitute a derogation or “concession” on Sovereignty. Entering into international agreements as a matter of free will is the exercise or attribute of Sovereignty, not its concession to another State[2].

I have reviewed the Tax Treaty from the perspective of whether it makes any legal concession on Sovereignty. In my opinion, and in accordance with the principles described above, it does not for the following reasons-

  1. The Tax Treaty has been entered into by the UK Government on behalf of Gibraltar in exercise of the UK’s Sovereignty rights and competences in accordance with our own legal order (i.e. the Gibraltar Constitution);
  2. The Tax Treaty has been entered into (as described in sub-para 1 above) with the express, freely given agreement and at the request of the Gibraltar Government, who negotiated it.
  3. The necessary legislation to give effect to Gibraltar’s obligations under the Tax Treaty will be enacted by the Gibraltar Parliament and other Gibraltar (secondary) legislation.
  4. Gibraltar’s obligations under the Treaty will be administered by Gibraltar’s own constitutional competent authorities and enforced by its own authorities, including its courts.
  5. Spain is granted no political, administrative, executive, legislative or judicial competences as to what should be Gibraltar’s (tax or any other) laws, or its enforcement. Nor is Spain the arbiter of Gibraltar’s compliance with its obligations under the Treaty.
  6. Gibraltar’s agreement to conduct certain aspects of its tax regime in accordance with criteria so agreed does not in my opinion constitute a legal concession on its sovereignty.”

The Chief Minister of Her Majesty’s Government of Gibraltar, the Hon Fabian Picardo QC MP, said: “The Government does not usually publish legal advice provided to it.  In this instance, I have authorised the disclosure of this advice because it goes to the core issue of sovereignty and I do not want anyone to think that we are hiding any advice that suggests that we have failed to entirely protect any aspect of our sovereignty, including out tax sovereignty.  I have cleared with Sir Peter the publication of his advice ahead of having done so. The advice is longer and includes advice on the draft laws being prepared for introduction in to the Parliament to give effect to the tax treaty with Spain.  That is purely technical advice.  The political opinion of Sir Joe Bossano, Dr Joseph Garcia and the rest of my Cabinet and the Legal Opinion of Sir Peter Caruana are a better basis on which to judge the International Tax Treaty with Spain than the biased and self-serving views of the members of a political party who wanted to pretend to use the treaty as a political-boogeyman in the General Election.”

 

 

[1] Kelsen’s Legal Theory 204-05, 251-53

[2] Permanent Court of International Justice in The ‘Wimbledon’ (Government of His Britannic Majesty v German Empire) PCIJ Series A No. 1 and The ‘Lotus’ (France v Turkey) PCIJ Series A No. 10 case.