The action stems from the fact that the EC directive on mutual assistance in the tax field is not applied in Gibraltar as far as VAT and excise duties are concerned, as it is applied in the UK.

'The United Kingdom has failed to comply with the formal request to amend its tax system which the commission issued on 15 July 2002,' said Iberia News.

Under Council Directive 77/799/EC, member states are required to exchange any information that they need in order to effect a correct assessment of taxes on income and capital, on value added tax, and on excise duties on mineral oils, tobacco and alcohol. The Directive applies to the whole territory of the Community, which includes Gibraltar.

The directive has been implemented in Gibraltar as far as taxes on income and capital are concerned, but not in respect of VAT and excise duties.