In an opinion issued on 7 April, the Advocate General Niilo Jääkinen dismissed an EU Commission finding that Gibraltar's low corporate tax regime constituted unlawful State aid.

Mr Jääkinen considers that the State aid rules cannot be applied to combat harmful tax competition between Member States. In his opinion, the provisions of EU law that relate to State aid seek only to remedy distortions of competition which arise when a Member State grants a particular advantage to certain undertakings or goods. On the other hand, where a tax measure is of a general character, it constitutes an adjustment to general fiscal policy rather than State aid. Therefore a substantial proportion of harmful tax measures are general measures to which the provisions of EU law concerning State aid cannot be applied.

The Advocate General's opinion was issued on foot of an appeal brought by the Commission against a decision of the General Court in 2008. That earlier decision had overturned the Commission's decision that the low corporation tax regime operated in Gibraltar constituted a scheme of State aid. The Commission considered that the Gibraltar CT regime was State aid because the tax measures introduced in Gibraltar were regionally selective. Companies in Gibraltar would be taxed, in general, at a lower rate than United Kingdom companies. Further the Gibraltar CT regime was materially selective since its structure would result in offshore companies not being taxed in Gibraltar.

Mr Jääkinen backed the General Court's decision that the territory of Gibraltar constitutes the territorial reference framework to be used for assessing the selectivity of the intended reform. Gibralter is a territory in its own right and is not a region of the UK for the purposes of State aid. It is incorrect therefore to compare the Gibralter CT regime with that of the UK as a whole.

While the Advocate General's Opinion is not binding on the ECJ, the ECJ usually follows the opinion (at least for tax cases).