Economy Power’s Chief Minister’s Pre-Election Budget.
Fabian Picardo delivered his 4th Gibraltar Budget on 22 June 2015 which was full of records and rhetoric as the Chief Minister reminded us how much his government had achieved compared with its predecessor. In terms of pure tax measures, these were thin on the ground, but there were 2 developments which stood out, among a 1% rate reduction and some increases in allowances for those taxpayers on the Allowance Based System.
First, and hand-in-hand with the halving of import duty on flooring, carpets and associated construction materials, is the imposition of a withholding tax on payments to foreign traders providing services in Gibraltar (but it appears to cover a wider remit of services provided by non-residents). We do not know how much will have to be withheld at this stage but this measure should at least create a level playing field for Gibraltar-based suppliers who have to compete with service providers from eg Spain, Morocco or even the UK.
Secondly, and perhaps more surprisingly, the Chief Minister announced a Tax Amnesty to encourage those with undeclared income stashed overseas to repatriate it to Gibraltar. A payment of 5% of the amount in question will “wipe the slate clean”, and this facility is available until 21 December 2015. Thereafter, any amounts are potentially subject to a penalty of up to 100% of the tax in question.
This is Gibraltar’s first amnesty and will no doubt elicit some protests from those who argue that it is unconstitutional and unfair to those taxpayers who have paid all their taxes in full and on time. Nonetheless, where amnesties have been offered elsewhere (such as in both the Isle of Man and Ireland in recent years) the concerns have usually been justified by the amounts of tax collected, which have been considerable.