Gibraltar, which has been one of the strongest advocates for zero corporate taxes, has rejected the concept in favour of low tax. Chief minister Peter Caruana made the surprising announcement in Gibraltar yesterday. “We are moving away from zero tax to low tax. An internationally competitive tax rate is an important attraction for business. Our philosophy remains that a low tax rate encourages investment and delivers wealth,” he said. The Gibraltar budget is due in the next few days and he said that it will contain this remarkable development. Gibraltar has always maintained that it was the first jurisdiction to devise the zero-ten format for corporate taxes, which was introduced first in the Isle of Man last summer. But Gibraltar’s attempt to establish its own zero-ten scheme has been hampered by clashes with the European Commission. Zero-ten means that all companies – whether domestic or international – pay zero per cent corporation tax with the exception of financial services companies which pay ten per cent. Mr Caruana said that the jurisdiction is still awaiting a European Court ruling on regional selectivity issues relating to tax reforms, but it has already agreed to phase out exempt company status by 2010. Gibraltar has benefitted in the last year from a tripartite agreement with Spain and the UK over a range of issues which allows the neighbours on the Iberian peninsula to develop a more normal relationship.