THE EU is applying pressure to end the best thing that Gibraltar has: low taxes.

The European Commission has called on the UK government to phase out a tax break for offshore companies based in Gibraltar by 2010.

The Commission, which said the practice flouted EU competition rules, gave the UK a month to agree or else face possible legal action.

Under Gibraltar's Exempt Company programme, more than 8,000 offshore firms do not have to pay income tax.

Instead, they pay a small fee. The scheme is a life blood for Gibraltar.

While Gibraltar only gets a fixed annual payment of between £225 and £300 from each company, the programme has encouraged some 8,500 overseas companies to invest in the British territory on the southern tip of Spain.

The presence of these companies has helped fuel Gibraltar's service economy.

So, instead of thinking whether corporate taxes all across Europe are too high, they're trying to stiffle a territory which promotes economic activity. Well done, guys.