‘Only Spain claims Gibraltar is a tax haven’

Gibraltar is not a tax haven, the chief minister of the contested British territory on Spain's southern shore said on Tuesday, rebuffing accusations by Madrid that it helps Spanish companies avoid paying taxes.

'Only Spain claims Gibraltar is a tax haven'
The world sees Gibraltar as a fully compliant financial services jurisdiction like Frankfurt, London, or Madrid, says the territory's Chief Minister. Photo: Scott Wylie

"Gibraltar does not see itself as a tax haven, perhaps more importantly Gibraltar is not regarded as a tax haven by the international community," Fabian Picardo said in an interview with news agency AFP in Madrid.

Making his argument, Picardo said the territory had done more than enough to put it on the Organisation for Economic Cooperation and Development's "white list" of jurisdictions that comply with global rules.

Gibraltar earned its spot on the list at the end of 2009 and has signed 26 information agreements with other jurisdictions to comply with the standard.

To get on the "white list" a territory needs to have signed 12 or more such agreements, a criterion decided by the OECD and the Group of 20 richest nations in the wake of the financial crisis that began in 2008.

"If we look at the treatment that Gibraltar gets from the OECD, which I think is the best barometer of whether countries should be considered tax havens or not, then the OECD listings tell you very clearly that it is not a tax haven," the minister said.

"The reality is the world regards Gibraltar… as being a fully compliant financial services jurisdiction much as Frankfurt, London, Paris or Madrid might regard themselves and it is only Spain that continues beating Gibraltar with that description for its own nefarious purposes," Picardo said.

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But Madrid continues to regard Gibraltar as an offshore centre which allows Spanish firms to pay taxes in the territory even though they operate in Spain.

Spain's tax office has set up a working group to analyze tax payments made in Gibraltar, daily Spanish newspaper El País reported last month.

It said hundreds of millions of euros in Spanish company earnings escape Spain's control each year through Gibraltar, the newspaper said.

"It is just not happening, there is no evasion, and certainly no evasion on that scale because if there were, the government of Gibraltar would detect it and it would stick out like the sorest thumb in the jungle," said Picardo.

Gibraltar, a peninsula in southern Spain ceded to the British in 1713, abolished in January 2011 its "exempt status tax regime" under which some companies avoided tax and instead introduced a single 10 percent levy.

"Ten percent is the rate which the OECD considers is the real rate of tax which a jurisdiction must have before it is considered not to be a tax haven," said Picardo.

The spat is part of a long-running dispute over Gibraltar, which houses traditional British red phone boxes, pubs and fish and chip shops.

Spain argues that the 1713 Treaty of Utrecht under which Madrid ceded Gibraltar to Britain, only granted waters in the port and did not cede the three nautical mile stretch claimed by Britain.

Police boats from the two sides have faced off several times in the waters around Gibraltar, which is strategically located at the western mouth of the Mediterranean.

Picardo urged Spain to take its claim to the Hamburg-based International Tribunal for the Law of the Sea, which has the jurisdiction to settle maritime disputes.

"I am the fifth chief minister of Gibraltar to issue that challenge in the past 50 years. Spain has never had the courage of her convictions to take it up," he said.

"I think that demonstrates that they know that they don't stand a snowball's chance in hell of ever demonstrating that those are anything other than British Gibraltar territorial waters."

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