Booming Gibraltar fights ‘blue-collar tax haven’ tag

With robust growth and nearly no unemployment, the tiny British outpost of Gibraltar on Spain's southern tip is a bubble of prosperity that contrasts with the economic malaise engulfing its neighbour.

Booming Gibraltar fights 'blue-collar tax haven' tag
Gibraltar saw its gross domestic product (GDP) expand by 7.8 percent in 2012 to £1.2 billion pounds (€1.4 billion), Photo: Scott Wylie

"The UK and Spain both face sluggish growth for many years to come and it feels at times that Gibraltar is stuck in an economic time warp," the Gibraltar chamber of commerce said in its annual report.

Gibraltar — whose British sovereignty Spain disputes — saw its gross domestic product (GDP) expand by 7.8 percent last year to 1.2 billion pounds (1.4 billion euros).

By contrast Britain posted sluggish growth of 0.2 percent while Spain's economy shrank by 1.4 percent as it continued to reel from the collapse of a property bubble in 2008.

Check out The Local's list of ten things you didn't know about Gibraltar.

"The international economic crisis seems hardly to have affected Gibraltar," said Gibraltar government spokesman Stuart Green.

The internally self-governing British overseas territory, measuring just 6.8 square kilometres (2.6 square miles) and home to about 30,000 people, has one of the highest GDP per capita ratios in the world.

Its unemployment rate stands at just 2.5 percent while in Spain it is more than ten times higher at 26.3 percent — and in the region of Andalucia adjacent to the British outpost it is 35.8 percent.

Roughly 10,000 Spaniards cross the border into Gibraltar to work everyday and they now find themselves caught up in a diplomatic row over the disputed waters around the territory.

Spain at the end of July tightened its vehicle checks at its border with Gibraltar — causing tailbacks of several hours — after Gibraltar dropped 70 concrete blocks into the waters off its coast with the aim of creating an artificial reef.

The row over the reef follows long-standing tensions over the fiscal policies that have fuelled Gibraltar's economic success, with Madrid accusing the territory of being a tax haven that allows Spanish firms to avoid paying taxes.

'We are clearly not a tax haven'

Gibraltar has no sales tax and in January 2011 it abolished its "exempt status tax regime" under which some companies avoided taxes and replaced it with a single 10 percent levy, far lower than Spain's rate of 30 percent.

The territory's favourable tax policies have helped build up its banking and financial services sector, which along with tourism and its port accounts for 25–30 percent of its GDP. The online gambling sector accounts for about 15 percent of GDP.

"I have studied the Gibraltar economy for the past 35 years and I have seen it grow from an economy that provided support to Britain's Ministry of Defence and was very much a blue collar economy into an economy with a high proportion of well qualified professionals," said John Fletcher, a professor at Britain's Bournemouth University.

Britain has sharply reduced its military presence in Gibraltar and it now accounts for just 6.0 percent of the local economy, down from 60 percent in the early 1980s.

"Gibraltar's taxes on the financial system attract money, so even it is not a tax haven it looks like one," said Pedro Aznar, a professor at Spain's ESADE business school.

There are about 18,000 companies officially registered in Gibraltar, known as "the Rock", which enjoy its low tax rates.

Gibraltar's tax advantages are unfair competition for Spain, said Jesus Lizcano, the head of the Spanish branch of anti-corruption watchdog Transparency International.

"It is not very favourable since it is close to Spain and can channel certain business and investments," he said.

"Britain has many tax havens under its jurisdiction, like the Isle of Jersey, the Isle of Man, the islands of Bermudas and Gibraltar," he added.

Gibraltar roundly rejects the claim that it is a tax haven.

"We are clearly not a tax haven, we conform to all EU rules and regulations," said Green, the Gibraltar government spokesman, adding income and corporate taxes are "slightly lower" in the territory than in many other EU nations.

Gibraltar points out that it has signed 26 information exchange agreements with 26 countries, including France, Germany and the United States and is on the OECD's "white list" of jurisdictions that comply with global tax rules.

"I can tell you people do pay taxes here, they pay income tax, they pay social insurance and companies pay corporation tax so its completely misleading to say we don't pay any tax," said Gibraltar Chamber of Commerce head Edward Macquisten.

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Gibraltar holds referendum on its draconian abortion laws

Gibraltar heads to the polls on Thursday to vote on plans to ease abortion laws which currently carry possible life sentences for offenders, in a referendum delayed for over a year by the coronavirus pandemic.

Gibraltar holds referendum on its draconian abortion laws
A woman wears a t-shirt reading " Gibraltar for Yes!" outside a polling station in Gibraltar, on June 24, 2021. Photo: Jorge Guerrero/AFP

The issue has exposed sharply opposing views within this tiny, normally closely-knit British enclave at the southernmost tip of Spain, which is home to some 32,000 people.

The referendum was initially slated for March 19 2020 but a week ahead of the vote it was postponed as virus cases began spiralling at the start of the pandemic.Except in cases where it would save the mother’s life, abortion is currently banned in Gibraltar on pain of life imprisonment, although such a penalty has not been applied in modern times.

The government is proposing changes to the law to allow abortion where a woman’s mental or physical health is at risk — such as in cases of rape or incest — or when foetuses have fatal physical defects.

Although the changes have already been approved by Gibraltar’s parliament, the referendum will decide whether or not that amended law be brought into force.

Under the changes, a woman would be able to undergo an abortion up to 12 weeks into her pregnancy if her mental or physical health is deemed at risk, or beyond if such damage would be grave and permanent.

There would be no time limit on cases involving fatal foetal anomaly.

Until now, women wanting to have an abortion have had to travel to Spain or to Britain to undergo the procedure.

Chief Minister of Gibraltar Fabian Picardo and his wife Justine Olivero leave a polling station after casting their ballots. Photo: JORGE GUERRERO/AFP

– ‘In Gibraltar’s best interests’ –

Ahead of the vote, both sides have been campaigning hard, with Chief Minister Fabian Picardo and two other party leaders releasing a video urging people to vote “Yes” to the proposed amendment to the crimes act that will regulate abortions in Gibraltar.

“My personal, professional & political opinion on the abortion referendum: it is in #Gibraltar’s best interests to #VoteYes on Thursday 24th June,” Picardo tweeted.

“No” campaigners have also been rallying support with hundreds of people dressed in pink and purple joining a pro-life “Save Babies, vote no” march through the city centre last week, chanting “We vote no!”

On the ballot, voters will be asked: “Should the Crimes (Amendment) Act 2019, that defines the circumstances which would allow abortion in Gibraltar, come into force?”

If the changes are approved, the law is expected to take effect fairly quickly although officials have not yet laid out a timeline.

The proposed changes came after Britain’s Supreme Court ruled in June 2018 that Northern Ireland’s abortion laws, which at the time were almost identical to Gibraltar’s, were incompatible with the European Convention on Human Rights.

“It is therefore clear that if the equivalent law on abortion in Northern Ireland was in breach of the Convention, our identical, archaic law is too,” wrote Picardo in an op-ed in Wednesday’s Gibraltar Chronicle.

“It is our duty to vote to stop this ongoing breach.”

Picardo has said he believed the changes were long overdue and that the plans would be approved “by a very large majority”.