"Last year, and in order to signal the Government’s seriousness of purpose in reducing corporate tax rates, I reduced corporate tax rates to 33%, and said that I would reduce it further this year to 30%, with a signalled reduction to 27% next year," Caruana told Parliament in his budget speech.

"In order to further signal the Government’s commitment I am advancing that timetable by one year, and therefore the corporate tax rate is now reduced by 6% from 33% to 27% with effect from this year that is the year of assessment 2008/09," he added.

Caruana explained that he envisages a further cut in the rate next year, before moving to the rate of between 10% and 12% from 2010, adding that: "My strong preference will favour the bottom end of that range."

The Chief Minister also announced further cuts in personal income taxation. These are mainly aimed at those on lower incomes, although the top rate of tax for taxpayers on the Gross Income Based System will also be reduced with effect from 1st July 2008 from 40% to 38%.

Under the measures announced by Caruana, tax payable by low income earners will be further reduced by increasing Low Income Earners’ Allowance with effect from 1st July 2008 as follows:

• By GBP880 for taxpayers with incomes below GBP8000. This means that people with income less than GBP7,500 will pay no tax at all.
• By GBP300 for taxpayers with incomes between GBP8,000 and GBP17,500
• By GBP250 for taxpayers with incomes between GBP17,500 and GBP18,500
• By GBP150 for taxpayers with incomes between GBP18,500 and GBP19,500

Caruana revealed that the jurisdiction's economy has grown strongly in the last two years, with GDP expanding by 9.5% in 2006 and by 12.7% in 2007.The financial services sector has contributed strongly towards this growth, despite the uncertainty surrounding Gibraltar's offshore taxation regime, as the European Union continues to deliberate on the issue.

"As Professor Fletcher observes in the 2007 Model Update, the finance centre is a major activity and a vital segment of our economy," Caruana noted.

The number of jobs in the whole of the finance centre stood in 2007 at 2,378, up by 162, or 7% from 2006. Legal activities accounted for 224 jobs and accountancy for 265 jobs in 2007.

There are now 100 licensed insurance operations in Gibraltar; 60 in licensed companies and 40 in 6 licensed protected cell insurance companies.

There are also 33 investment firms, 32 Experienced Investor funds, 12 protected cell funds companies, 86 trust and company managers, and 18 banks with total assets of GBP11bn, and funds under management of GBP 10.3bn.

"The sector continues to grow," Caruana observed. "The critical mass that has been achieved in this sector now makes Gibraltar a mainstream insurance domicile within the European Union. Given this robust performance in the current climate of tax uncertainty, the prospects for our finance centre are huge when the new tax system can be introduced," he suggested.

The Chief Minister also announced that Gibraltar's online gaming industry has had another good year. Employment levels have held steady at around 1,800, and in April 2008 there were 19 licensees, compared to 16 in April 2007.

Meanwhile, Government revenue from remote gaming tax has increased from GBP6.8mn to GBP8.2mn last year.