Gibraltar slams Spain over ‘fanciful’ tax claims

Authorities in Gibraltar have slammed claims by a top Spanish official that the UK-held territory costs Spain €1 billion ($1.3 billion) a year in lost tax revenues, saying the figure is "a financial flight of fancy".

Gibraltar slams Spain over 'fanciful' tax claims
Spain accuses Gibraltar of not doing enough to tackle tobacco smuggling and money laundering, arguing that the territory operates as a tax haven. Photo: Marco Moreno

"The wealth that Gibraltar enjoys cannot continue to be based solely on an economy that is clearly damaging for our country and for the European Union," said Spain's Minister for European Affairs Íñigo Méndez de Vigo in an interview with the country's conservative ABC newspaper.

"The (Spanish) tax office estimates that Gibraltar's current fiscal regimen is causing losses" close to a €1 billion ($1.3 billion) for Spain, the minister added.     

His comments come a week after the EU's anti-tax fraud agency Olaf urged Spain and the UK to tackle the issue of money laundering and tobacco smuggling in the UK territory home to just 30,000 people.

Spain accuses Gibraltar of not doing enough to tackle tobacco smuggling and money laundering, arguing that the territory operates as a tax haven.

Gibraltar has no sales tax and a 10 percent levy on company profits, well below Spain's rate of 30 percent. Some 16,000 firms are officially registered in the territory, with Spain arguing many of these firms are taking advantage of advantageous tax rates.

The Olaf report backed Spanish claims that the territory's economy damaged Spain, Méndez de Vigo told ABC, saying Spain's ruling party had been attempting to address the issue since coming into power.

But Gibraltar authorities on Tuesday reacted strongly to the minister's comments.

The €1 billion figure was a "financial flight of fancy," the government was quoted as saying in a statement.

There were 15,673 active companies registered in Gibraltar, but only 66 of these had Spanish nationals living in Spain as shareholders, said the government to back up its claims.

“This helps to clearly demonstrate that Gibraltar is, unsurprisingly, not seeing significant numbers of Spanish individuals using Gibraltar’s financial services,” the statement read.

Gibraltar's government added that the territory's 2010 tax laws had been approved by the EU with only Spain holding out.

Instead of holding on to "medieval hang-ups on Gibraltar", Spain should work with the territory for the economic good of the region around The Rock, said Chief Minister Fabian Picardo.

Picardo also stressed the positive impact of Gibraltar's economy on the region.

"Apart from the jobs we already create for the region and the saving on unemployment benefits there are also the salaries that flow from Gibraltar to Spain, the social insurance set-offs, the spending of Gibraltar residents in Spain and the supply to Gibraltar businesses of goods and services," he said.

"Mendez de Vigo would therefore do better to concentrate on that sort of co-operation with Gibraltar and move on from just bashing the Rock in August, which is fast becoming one of the hallmarks of this PP (government) administration."

Relations between London and Madrid became particularly strained last year after Gibraltar dropped 70 concrete blocks into the sea in July, in what its government said was an attempt to create an artificial reef.

The move had the effect of also blocking Spanish fishing boats from operating close to the airport runway, and Madrid responded by introducing stringent border checks.

Spain has repeatedly criticized Gibraltar for failing to clamp down on its imports, and many in Spain see the UK territory with 30,000 residents as a haven for smugglers and tax evaders. 

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