Gib Opposition Grills Government Over Tax Reform Package

by Amanda Banks, Tax-News.com, London

13 August 2002

The Opposition Liberal Party in Gibraltar recently issued a statement questioning whether the Rock will be able to compete and remain attractive to financial service providers when an 8% profits tax is introduced.

Speaking to the House on July 12, Chief Minister, Peter Caruana explained that: 'subject to EU clearance under State Aid Rules, two sectors of the economy only will pay a new tax on profit. The sectors are financial services providers and utility companies. The intended rate of profits tax for financial services providers is 8%, and will be subject, aggregated to the other taxes, to a maximum cap of 15% profit.'

However, Dr Joseph Garcia, Opposition spokesman on Trade, Industry, and Tourism has slammed the government for playing its cards too close to its chest, and for failing to properly explain and define the planned measures:

'There is a distinct lack of information available to the Opposition to allow us to judge for ourselves the economic effects of the new measure compared to the tax structure that it sets out to replace,' he stated, adding that the government had also failed to explain exactly its definition of 'financial services providers', meaning that both the Opposition and the insurance industry were unaware until recently that insurance institutions are likely to be affected by the tax.

'The Opposition also considers it to be quite odd that this 8% rate could be described as competitive in the context where less was being paid previously,' the Liberal Party statement read, continuing: 'In the Isle of Man it was reported today that the tax for fund managers and insurance is already zero rated. In Gibraltar, in sharp contrast, there will be an 8% tax coupled with the payroll and property tax, then capped to a maximum of 15%.'

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